I’m showing the PBS documentary, “Is Walmart Good for America?” to my AP Macroeconomics students today as we introduce the topic of trade balances.

Discussion questions will be posted soon.

For a recent assignment, IB year 1 students were required to make a 4-5 minute Xtranormal animation answering one of two IB questions relating to market failure:

• Explain, using examples, how market failure may occur when one party in an economic transaction possesses more information than the other party. (10 marks)
• Explain why inequality in the distribution of income within a nation is sometimes considered a market failure and how government policy can help reduce income inequality (10 marks)

Instead of simply answering the questions in a test or quiz, the students were asked to create a dialogue for two cartoon actors to engage in using the Xtranormal animation software.

Below is one of the more original animations that resulted. This one was created by my student Simon, whose superhero “Market Man” challenges an unethical businessman to come clean about his practice of not revealing all the information about his products ot buyers. Scroll down below the video to see the rest of the assignment instructions. Great job, Simon!

To see the rest of the student animations, visit our class’s Posterous page: ZIS Economics.

Market Man vs. Asymmetric Information
by: helmigsimon

The assignment is as follows:

1. Create a free account on Xtranormal.com or log in using one of your other online accounts.
2. Once logged in, click the “Create” tab.
3. Choose one of the themes for your video. Notice, however, that you have only 300 xp (xtranormal points) to use in the production of your video, so some of the themes you cannot use for free.
4. Once you’ve chosen a theme you can afford to make a video on, choose the question you wish to answer in your video.
5. Think about how to best answer the question in dialogue form. It is recommended that rather than simply answering the question like you would on a written test or quiz, you have your two characters engage in a conversation about the topic. Another suggestion would be to show a simulated transaction in which the main idea of the topic is illustrated.
6. Experiment with camera angles, expressions, gestures, sounds and so on. While your grade will be based wholly on the content of your dialogue, production quality can certainly add to the entertainment value of your video.
7. Keep your video between 4 and 5 minutes in length. Either of the two questions should be able to be addressed in this amount of time. Be sure to preview your video before publishing, otherwise you will spend your xp points and not have enough to make changes later on.
8.  When you have previewed the video and re happy with it, publish it to the Xtranormal site. After it has finished rendering, view your video and copy the embed code, then log into our class Posterous page (zis-economics.posterous.com) and past the embed code into the html screen of a new post. Publish your video on that page for your teacher to see. Make sure you name is included in the post.

On February 6 my IB year 2 Economics classes welcomed Dr. Irene Forichi, former Research Officer for Zimbabwe’s Ministry of Agriculture, and former Regional Emergency Agronomist for the Food and Agriculture Organization for Southern Africa. Dr. Forichi spoke with our classes about the role of agricultural productivity in contributing to human development and economic growth in Southern Africa.

For students or teachers who are interested, she delivered an excellent presentation about the agriculture-related obstacles to and strategies for economic development in the Southern Africa Development Community (SADC). Her presentation can be viewed here, or the PowerPoint she presented can be viewed below.

Teaching at an international school affords me the privilege of encountering and learning from truly unique and diverse individuals. Last week, my Economics classes were lucky to have as a guest speaker one very interesting and inspirational young man named Andrew Cunningham. Andrew, originally from Vermont, graduated from Duke University in 2008 and has helped co-found a non-governmental organization (NGO) focused on promoting grassroots strategies for economic development. WISER (Women’s Institute for Secondary Education and Research) serves a community of 35,000 in Kenya’s Muhuru Bay, an area where the per capita income is around $1 a day and 38% of the population is HIV positive.

Traditionally, less than 5% of young girls complete primary school in Muhuru Bay. In the town’s history, only ONE girl has ever gone to university (she would become the only Muhuru Bay native to complete her PhD and would eventually co-found WISER with Andrew). A combination of tradition, culture, and most importantly poverty had prevented improvements in the plight of woman in this poor corner of Africa. What was needed, decided Andrew and his founding partners, was an all-girls boarding school where opportunities for young women were promoted and academic achievement encouraged and fostered. WISER opened the community’s first all-girls secondary school in 2010 to 130 local girls who had made it through primary school.

Beyond female education, WISER have embarked on several other development projects in the last year and a half. In his visit to our IB Economics class, Andrew told the story of human development in Muhuru Bay as occurring primarily in three realms.

• Education, 
• health, and 
• entrepreneurship.

I will briefly summarize the three main development strategies WISER has employed in Muhuru Bay, starting with education.

Education as a development strategy:

Education is a primary and fundamental strategy for eradicating poverty. A nation’s human capital is its most vital resource, and the road to prosperity requires an effective education system that does not discriminate based on race, gender, or socioeconomic status. In Muhuru Bay, which is 14 hours by car across un-paved roads from Kenya’s capitol, the education system had failed to achieve meaningful results, both for boys and girls. Student performance on national examinations across the primary grade levels had historically averaged around 11% passing rates. Boys out-performed girls, but as a whole only about one in ten Muhuru Bay children passed the examination required for admittance to secondary school in Kenya.

WISER wished to improve this dismal statistic. If they were going to build a secondary school for girls, they would need to first get girls to pass the national exam for entrance to secondary school, or else their new building would be full of empty desks.

Andrew first talked to my class about the traditional development community (think World Bank, UNICEF, USAID) approach to promoting education in Africa. You are probably thinking the way to help these kids is to give them resources to improve their education. Build better schools, give them textbooks and school supplies, maybe uniforms, build a library, electricity in the classroom, chalk boards, heck, how about we give them laptop computers! All of these ideas represent the traditional development community’s approach to improving education in poor countries. The problem is that these strategies focus only on the inputs into education, and completely fail to look at the output.

Inputs and outputs are common topics of discussion in any Economics class. To produce anything, three resources are required: land, labor, and capital. The traditional approach to improving education in Africa focused primarily on the land and capital. Things such as pens, notebooks, laptops, and new libraries are great, but they have little actual impact on what gets learned in a school. The neglected factor was the labor (i.e. the teachers!) In Muhuru Bay, teachers were paid so miserably and worked in such dismal conditions that the incentive to actually improve their students’ results was just too weak! With passing rates at 11% on national exams, WISER set about figuring out how to use incentives to improve the outputs of education in Muhuru Bay.

A simple and relatively low-cost plan was put into action. Teachers were told that if their students’ scores increased by only 15% on the exams, they would receive a 100% increase in their salary. Andrew and WISER worked with the national education ministry to develop interim exams that could be given quarterly to help the teachers measure their students’ improvement before the annual national examination.

With only minimal investments on the land and capital resources (i.e. textbooks and classroom materials) in Muhuru Bay schools, and by spending less than $10,000 on teacher raises, the passing rate among Muhuru Bay schools increased in one year from 11% to 36%. Hundreds of students, boys and girls, who would not have been able to enter secondary school the previous year, instead passed the exam and were eligible for a secondary education, a crucial step towards a better future!

The teachers’ incentive pay program was such a success in Muhuru Bay last year that the state government has taken notice and intends to implement it in other rural communities throughout Kenya. By focusing on the outputs (student learning), rather than the inputs (classroom resources) WISER has assured that when their all-girls school opens in January, its seats will be filled with qualified students who successfully completed their primary education.

Health as a development strategy:

The second topic of Andrew’s discussion with my IB Economics classes focused on health and sanitation, specifically solving the problem of open defecation (“OD” is a technical term used in the development community referring to the fact that in many poor communities basic latrines are non-existent, and therefore people shit in the open). OD in Muhuru Bay contributed to the poor health and low life expectancy of locals; According to Andrew an estimated 60 people were dying each year of cholera, a disease spread via human waste.

In the health realm of traditional economic development programs, the same basic dilemma between focusing on the inputs or the outputs had stymied previous attempts to reduce OD in Muhuru Bay. Recently, an outside aid organization had made loans to the community to build 30 public latrines. Within a year, however, the latrines had fallen into disrepair and were essentially useless. When Andrew and his team asked the community members why they had let the latrines fall into such a poor state, their answer was predictable. These were not their latrines, they belonged to the aid organization that had built the latrines. If they were broken, the aid organization could fix them! Such logic reflects a common problem in economics, that of the tragedy of the commons. Because the latrines were public, no one owned them. Because no one owned them, no one cared for them. When the latrines fell out of repair, people quickly reverted back to OD, and instances of cholera and other diseases increased once more.

WISER decided to tackle this problem using a similar approach as the one used to fix primary education in Muhuru Bay, by focusing on the output, rather than the inputs. In this case, the goal was simple: create incentives for people to build their OWN latrines, which they would then have an incentive to take care of and use. The strategy for promoting personal latrines they decided to employ is one that has been successfully implemented throughout the developing world, and is now funded by UNICEF, which trains facilitators to go into a community and in a very short time, and at a very low cost, incentivize the locals to take sanitation into their own hands and build their own latrines.

Community Led Total Sanitation (CLTS) is a mind-blowing and shockingly blunt way to promote sanitation. Rather than spending thousands of dollars to build public latrines, the CLTS approach brings community members together for an afternoon of discussion and education about sanitation issues. Locals are asked to take an index card and go to “where they shit” and collect a sample of their own waste. A large pile of human waste is placed on a table in front of a room full of locals right next to a large selection of delicious foods. The facilitator then goes about discussing basic facts related to OD in the community, such as “If you added up all the shit your community produces in a year, how many donkeys would it weigh as much as?” or, “How many bags of rice would you have to eat to create this much shit?” In the mean time, of course, hundreds of flies have descended on the pile of waste in the front of the room, and the community members look on in utter disgust as the flies jump from the feces to the food and back again.

At the end of the lecture, the facilitator turns to the food and says, “Well, it’s time for lunch, who’s hungry?” In utter disgust, the locals ask the facilitator if he has gone mad. The lesson, of course, is that the food and water the community consumes is most likely being contaminated by the waste they produce and deposit in the open around their village. Within a few weeks of the CLTS project in Muhuru Bay, 256 new latrines were built by the community members themselves. Whereas previously, only around 15% of the locals used latrines regularly, after the CLTS project around 75% had access to the “facilities”.

The total cost of the CLTS sanitation project? Around $55, a tiny fraction of the cost of building the public latrines that had previously been neglected by the community. By focusing on the outputs rather than the inputs, real development in the health of the community was achieved at a very low financial cost.

Entrepreneurship and micro-lending as a development strategy:

The final approach to human development in Muhuru Bay Andrew discussed with my classes focused on the economic empowerment of community entrepreneurs. Micro-lending is a much talked about and widely used development strategy that provides financial credit or technology loans to entrepreneurs in poor communities to create small businesses, ideally ones with a socially beneficial purpose. Watch the first 12 minutes of the video below to get a better idea of the history and purpose of micro-finance as a strategy for achieving economic development.

In Muhuru Bay, the micro-lending scheme Andrew has pioneered involved not financial capital, but physical capital (i.e. technology).

WISER was able to secure several technology donations, including a copy machine, several laptop computers with cellular internet connections, a foot pump for water, and a digital LCD projector. WISER then solicited loan requests from several “young entrepreneurs”. Young men and women wrote business plans outlining how they would use the technology loans to generate income for themselves and the community, and provide services that would benefit others in the Muhuru Bay community. The technology would not be donated to the recipients; rather they would be required to pay back the value of the capital through their business revenues.

It is simply amazing how a few pieces of second-hand technology, items that we in the rich North would take for granted as relatively common and thus of very little social or economic value, can completely change a poor community in Africa for the better. Here’s how some of the capital Andrew and WISER loaned to young entrepreneurs were put to use to achieve meaningful development in Muhuru Bay:

• The copy machine was installed and powered by a generator. It was the first such machine ever installed in Muhuru Bay. Local businesses, students, job seekers and other could now, for a few cents, photo-copy their documents locally, avoiding the two hour drive previously required for such a service.
• The laptops were installed in an internet café and made available to local students and businesses. Farmers and fisherman could check product prices in the cities hours away, increasing efficiency and bargaining positions when middle-men came to town to buy their produce. Job openings in the city newspapers’ classifieds could be printed and posted for the local community to see, improving information symmetry between the poor countryside and the cities where job opportunities existed. The cost of access to these services was cheap, yet the entrepreneurs who were granted the laptop loan were able to pay back the cost of the technology in no time at all, and the community as a whole benefited from their existence.
• My favorite entrepreneurial venture involved the LCD projector. This piece of technology, which now hangs from the ceiling of thousands of classrooms around the rich world, had never before been seen in Muhuru Bay. You may think it ended up in a classroom or in an office building, but no; the entrepreneurs who received the projector hooked it up to a satellite dish which captured and projected English Premier League football matches onto the wall of a large room in a local building. The business was to sell tickets to local football fans who were more than happy to pay to watch English football matches in full color on a wall-sized screen. Before the projector, dozens would have huddled around a tiny television with poor reception to watch football matches. The “football theater” business was the most successful of all, and paid back its loan fastest.

All three of these entrepreneurial endeavors were very low cost, using donated technologies. The reason for their successes, however, must be attributed to the model for implementation. They were not simply “given” to the community. Such a strategy would certainly have led to the same “tragedy of the commons” experienced when the outside aid organization funded the construction of public latrines. The capital would have been neglected and fallen into disrepair. By lending the technology to businesses, however, the incentive for innovative and socially beneficial ventures was created, and a business model was developed to best utilize the resources in a profit-earning, sustainable manner. With very little inputs, fantastic outputs were achieved, enriching not only the entrepreneurs, but the entire Muhuru Bay community.

Economic Development the WISER Way:

Andrew’s visit to Zurich International School was eye-opening in many ways. He brought to light both the successes of WISER and other community projects in rural Kenya, but also shined a light on the failures of the traditional development community’s agenda. When I think about the hundreds of billions of dollars that have been committed to economic development in Africa over the past decades, and on into future decades, I wonder whether the diplomats and the politicians in the “aid community” have any idea how much has been accomplished on the ground in places like Muhuru Bay thanks to community-based organization like WISER.

With so little, so much can be accomplished. The poor of Africa and the world need resources, but more importantly they need education, health and sanitation, and business opportunities so that they can enjoy the benefits of development from the bottom up. Development aid, as it has traditionally been distributed, comes from the top down, funneled through national governments. Waste and corruption are rampant, and typically only a fraction of what has been given ends up on the ground in places like Muhuru Bay. Even when it does, the tragedy of the commons often results in inefficiency and waste, as the “inputs” are managed and distributed from the top down, leading to uncertainty of ownership and misaligned incentives once the resources are on the ground.

Perhaps aid from the outside is still needed, but Andy’s visit showed me and my students that something much more basic lies at the core of successful economic development. Education focusing on outputs rather than inputs, sanitation focusing on outputs rather than inputs, and entrepreneurship that empowers business leadership, have improved the lives of thousands in one Kenyan community. What could such a re-thinking of development strategies do for the rest of Africa and the developing world?

As we study economic development in year 2 IB Economics, we examine different models for economic growth. Growth in GDP is not the only determinant of economic development, which in order to be measured effectively must account for human welfare determinants such as life expectancy, literacy rates, child mortality rates, distribution of income, and so on. However, it has been shown throughout history that economic growth, or the increase in real output and income, correlates directly with improvements in development factors like those above.

The reason? Increases in national income usually mean at least some levels of improvement in access to basic necessities for the average citizen in a developing country. Also, higher incomes mean more savings, which means greater access to capital for investment by entrepreneurs. More investment leads to greater productivity and rising incomes for those who join the emerging industrial and service sectors that usually accompany economic growth. Furthermore, rising incomes mean more tax revenue for governments, whose spending on public goods like education, health care, and infrastructure result in real improvements in standard of living for not just the emerging upper and middle classes, but the poor as well.

Of course, the following models can be observed to varying degrees among the world’s developing economies today. Some of these models will fail to play out if the institutional and political environment fails to create a stable atmosphere for savings and investment. What you should notice, however, is the underlying importance of savings in all three models. Poor countries suffering from low savings and, even worse, capital flight, are doomed to a cycle of poverty, where funds for investment leading to productivity increases are never made available due to instable institutions like banking and politics. To put a poor country on a path towards economic growth and development, a strategy is needed. Such strategies will be covered in a later post. For now, let’s look at the models:

Harrod-Domar Growth Model:

The model suggests that the economy’s rate of growth depends on:

1. the level of saving
2. the productivity of investment i.e. the capital output ratio

The Harrod-Domar model was developed to help analyse the business cycle. However, it was later adapted to ‘explain’ economic growth. It concluded that:

• Economic growth depends on the amount of labour and capital.
• As LDCs often have an abundant supply of labour it is a lack of physical capital that holds back economic growth and development.
• More physical capital generates economic growth.
• Net investment leads to more capital accumulation, which generates higher output and income.
• Higher income allows higher levels of saving.

Lewis Structural Change (dual-sector) Model:

Many LDCs have dual economies:

• The traditional agricultural sector was assumed to be of a subsistence nature characterised by low productivity, low incomes, low savings and considerable underemployment.
• The industrial sector was assumed to be technologically advanced with high levels of investment operating in an urban environment.

Lewis suggested that the modern industrial sector would attract workers from the rural areas.

• Industrial firms, whether private or publicly owned could offer wages that would guarantee a higher quality of life than remaining in the rural areas could provide.
• Furthermore, as the level of labour productivity was so low in traditional agricultural areas people leaving the rural areas would have virtually no impact on output.
• Indeed, the amount of food available to the remaining villagers would increase as the same amount of food could be shared amongst fewer people. This might generate a surplus which could them be sold generating income.

Those people that moved away from the villages to the towns would earn increased incomes:

• Higher incomes generate more savings.
• Increased savings meant more fund available for investment.
• Increased investment meant more capital and increased productivity in the industrial sector, higher wages, more incentive to move from low productivity agriculture to high productivity industry, the circle continues…

Rostow’s Model – the 5 Stages of Economic Development:

In 1960, the American Economic Historian, WW Rostow suggested that countries passed through five stages of economic development.

According to Rostow development requires substantial investment in capital. For the economies of LDCs to grow the right conditions for such investment would have to be created. If aid is given or foreign direct investment occurs at stage 3 the economy needs to have reached stage 2. If the stage 2 has been reached then injections of investment may lead to rapid growth.

Since September 2011 I have been producing and publishing around three video lessons per week covering the topics I’m teaching in my three Economics classes at any given time. With an AP Macro class, a year 1 and year 2 class going on all at the same time, this means I’ve been making videos covering everything from linear supply functions to protectionist quotas to monetary policy.

This week I posted my 50th video lesson. Since I began producing lessons on my YouTube channel, they’ve been viewed over 35,000 times and nearly 200 people have subscribed to my YouTube feed.

If you haven’t checked out my new website, The Economics Classroom, consider subscribing to the weekly newsletter from that site. You’ll receive one email a week with links to the latest videos covering Micro, Macro and International concepts. In addition, I’ve been creating and posting free worksheets, practice activities and even unit quizzes and tests to the resource page.

If you’re wondering what my videos are like, check out the one I posted tonight to introduce the new IB Year 1 unit on Theory of the Firm, which I’ll start teaching on Tuesday this week!

One question that often comes up in my class discussions of market failure and public goods is “Why can’t we just have a global government that intervenes to correct those market failures with global impacts?” The global market failures my students get so worked up about are those arising from common access resources, such as deforestation, over-fishing and global warming, those resulting from information asymmetry, such the global financial crisis of 2008-2009, and the global inequality in the distribution of income and economic opportunity.

What I haven’t ever really considered or explained to my students (until now) is the history of public goods. In the column below, Martin Wolf of the Financial Times’,  tells the history of public goods, which as it turns out, is intimately tied to the history of the modern state as we know it. This column should become a must read for all economic students studying market failure.

From The World’s Hunger for Pulbic Goods – January 24, 2012, Financial Times

What… is a public good? In the jargon, a public good is “non-excludable” and “non-rivalrous”. Non-excludable means that one cannot prevent non-payers from enjoying benefits. Non-rivalrous means that one person’s enjoyment is not at another person’s expense. National defence is a classic public good. If a country is made safe from attack everybody benefits, including residents who make no contribution. Again, enjoyment of the benefits does not reduce that of others. Similarly, if an economy is stable, everybody has the benefit and nobody can be deprived of it.

Public goods are an example of what economists call “market failure”. The point is generalised in the language of “externalities” – consequences, either good or bad, not taken into account by decision-makers. In such cases, Adam Smith’s invisible hand does not work as one might like. Some way needs to be found to shift behaviour; public goods usually involve some state provision; externalities usually involve a tax, a subsidy or some change in property rights…

The history of civilisation is a history of public goods. The more complex the civilisation the greater the number of public goods that needed to be provided. Ours is far and away the most complex civilisation humanity has ever developed. So its need for public goods – and goods with public goods aspects, such as education and health – is extraordinarily large. The institutions that have historically provided public goods are states. But it is unclear whether today’s states can – or will be allowed to – provide the goods we now demand.

The story of public goods goes back to the very beginning of states, which were the result of the agricultural revolution. The latter made populations vulnerable to… “roving bandits”. The answer was the “stationary bandit” – the state. It was not a perfect answer – answers almost never are. But it worked well enough to permit substantial increases in population. The state provided defence in return for taxation. The empires – Rome or China – enjoyed economies of scale in providing security. When Rome collapsed, security was privatised by local gangsters, at huge social cost: this we now call feudalism.

The industrial revolution expanded the activities of the state in innumerable ways. This was fundamentally because of the needs of the economy itself. Markets could not, on their own, provide an educated population or large-scale infrastructure, defend intellectual property, protect the environment and public health, and so on. Governments felt obliged – or delighted – to intervene, as suppliers and regulators, or subsidisers and taxers. In addition to this, the arrival of democracy increased the demand for redistribution, partly in response to the insecurity of workers. For all these reasons, the modern state, vastly more potent than any that existed before, has exploded in the range and scale of its activities. Will this be reversed? No. Does it work well? That is a good question.

Yet consider where we are now. The impact of humanity is, like the economy, increasingly global. Economic stability is a global public good. So, in the era of nuclear weapons, is security. So, in important respects, are control of organised crime, counterfeiting, piracy and, above all, pollution. So, even, is the supply of education or health. What happens anywhere affects everybody – and increasingly so. Unless there is a global economic collapse, an increasing number of the public goods demanded by our civilisation will be global or have global aspects.

Our states cannot supply them on their own. They need to co-operate. Traditionally, the least bad way of securing such co-operation is through some sort of leadership. The leader acts despite free riders. As a result, some global public goods have been adequately – if imperfectly – supplied. But as we move again into a multipolar era, the ability of any country to supply such leadership will be limited. Even in the unipolar days, it only worked where the hegemon wanted to provide the particular public good in question.

I started with economic stability, because the big surprise of the past few years is just how difficult it has proved to provide even this. The point I finish with is far broader. Ours is an ever more global civilisation that demands the provision of a wide range of public goods. The states on which humanity depends to provide these goods, from security to management of climate, are unpopular, overstretched and at odds. We need to think about how to manage such a world. It is going to take extraordinary creativity.

Fair trade schemes aim to get more of the money we spend on our stuff into the hands of the workers in less developed countries where they originate. Some examples of goods produces in fair trade cooperatives in poor countries include fruits, tea, coffee and cocoa. Some handicrafts and textiles are also available from Fair trade programs as well.

It is estimated that approximately 7.5 million producers in the developing world participate in fair trade programs, producing $5 billion worth of output.

According to the European Fair Trade Association, fair trade is

a trading partnership, based on dialogue, transparency and respect, that seeks greater equity in international trade. It contributes to sustainable development by offering better trading conditions to, and securing the rights of, marginalized producers and workers – especially in the South.

Fair Trade organisations (backed by consumers) are engaged actively in supporting producers, awareness raising and in campaigning for changes in the rules and practice of conventional international trade”.

Fair trade as a strategy for economic development is controversial, as many argue that either fails at raising the incomes of the farmers it is supposed to serave or that it incentivizes farmers to remain in the low-productivity agricultural sector rather than seeking higher productivity jobs in manufacturing, thereby contributing to poverty in poor countries.

Below are two videos that proclaim the benefits of free trade. After watching the videos, discuss the benefits of fair trade with your class.

On the other side of the issue are several economic arguments against the use of fair trade as a strategy for economic development. First listen to this 19 minute discussion between EconTalk’s Russ Robert’s and Duke University’s Mike Munger over the role that Fair Trade coffee plays in promoting economic development.

Econ Talk - Fair Trade Coffee [ 19:44 ] Play Now | Play in Popup | Download (115)

Next, read the two articles below a

• The poverty of Fairtrade coffee – Telegraph Blogs
• Fairtrade profits rise, but is the small farmer missing out? – This Britain – UK – The Independent

Discussion Questions:

1. Discuss the strengths and weaknesses of Fair Trade programs at promoting economic development.
2. Outline the possible advantages of a country specializing in manufactured goods instead of primary products.
3. What factors explain the growth in importance of multinational corporations over recent decades? Illustrate your answer where possible by making reference to your own or other countries. Do multinational corporations work in favor of or against the interests of Less Developed Countries?
4. To what extent has the international trading system contributed to economic growth and development in less developed countries?
5. Discuss the view that increased trade is more important than increased aid for less developed economies.

IB Economists,

For your final quiz on our market failure unit, you will not be sitting in class writing, as usual. Rather, you will answer one of two possible questions in a video dialogue using the software available through the website Xtranormal. Here’s an example of what you will create:

Market Failure Video Quiz
by: welkerjason

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The assignment is as follows:

1. Create a free account on Xtranormal.com or log in using one of your other online accounts.
2. Once logged in, click the “Create” tab.
3. Choose one of the themes for your video. Notice, however, that you have only 300 xp (xtranormal points) to use in the production of your video, so some of the themes you cannot use for free.
4. Once you’ve chosen a theme you can afford to make a video on, choose the question you wish to answer in your video.
5. Think about how to best answer the question in dialogue form. It is recommended that rather than simply answering the question like you would on a written test or quiz, you have your two characters engage in a conversation about the topic. Another suggestion would be to show a simulated transaction in which the main idea of the topic is illustrated.
6. Experiment with camera angles, expressions, gestures, sounds and so on. While your grade will be based wholly on the content of your dialogue, production quality can certainly add to the entertainment value of your video.
7. Keep your video between 4 and 5 minutes in length. Either of the two questions should be able to be addressed in this amount of time. Be sure to preview your video before publishing, otherwise you will spend your xp points and not have enough to make changes later on.
8.  When you have previewed the video and re happy with it, publish it to the Xtranormal site. After it has finished rendering, view your video and copy the embed code, then log into our class Posterous page (zis-economics.posterous.com) and past the embed code into the html screen of a new post. Publish your video on that page for your teacher to see. Make sure you name is included in the post.

The questions: You may chose ONE of the following questions to address in your video:

• Explain, using examples, how market failure may occur when one party in an economic transaction possesses more information than the other party. (10 marks)
• Explain why inequality in the distribution of income within a nation is sometimes considered a market failure and how government policy can help reduce income inequality (10 marks)

Students, check out the link below. The winner of this competition will receive a cash prize of 1,000 British pounds. The questions are very interesting this year, and I believe a year two IB Economic student has all the knowledge and skill to write an outstanding essay on any one of this year’s topics!

Economics – RES Annual Essay Competition for Students 2012

This year’s competition is open to IB Economics students. The essays must be below 2,500 words. This topic questions the student may chose from are:

1. Africa is well-placed to achieve rapid and sustainable development in the decade ahead. Do you agree?
2. Over a million young people in the UK are unemployed. What should be done to address the problem?
3. A breakup of the euro provides the best hope for a durable recovery of the European economy. Discuss
4. To what extent can we use ideas drawn from behavioural economics to help address specific social and economic problems?
5. Manufacturing’s share of the UK economy shrank from 19% in 1998 to 12% by 2007. Does this matter and, if so, how could policy revitalise British manufacturing?
6. Is there a better way out of the debt crisis than austerity?

If any of my students are interested in entering the competition, let me know and I would be happy to speak with you about the selection of topic.