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KAREN FOLEY: Welcome back to the Student Hub Live showcase from the Faculty of Arts and Social Sciences at the Open University. We're now going to talk about the economics of every day. And we're going to give you a taste of some of the economic concepts that you might learn about in our new BA Hons economics degree. And we're going to talk about some of the issues that are raised through this module, you and your money, and also economics in context.
So we've got three words here that we'd like to ask you about. What three words do you associate with economics? And also, three things, what might economics play a role in your everyday life?
So tell us one, two, or three of those things. But you need to fill in each box. Otherwise, the results won't submit. So if you can only think of one or two things, that's fine. Just put a full stop in, and your results will submit.
OK, so we've challenged our team here. We've got Roberto and Jonquil and Cristina. We're going to talk about some various aspects of economics of every day. And we challenged you to think about one thing that you could talk about. And I see you haven't really brought very much apart from some module material. So Roberto, what is your answer to how we can make an everyday object apply to economics?
ROBERTO SIMONETTI: Well, I thought I didn't need to bring anything because economics is about many different things.
KAREN FOLEY: You're not getting away with that.
[LAUGHTER]
ROBERTO SIMONETTI: No, no, no, no, I'll focus on an object. But you can apply to economics to things that people, I think, people who are not into economics wouldn't expect. For instance, one thing is say this glass of water. You could talk about the economics behind a glass of water. And so you could think about, for instance, what the value of water is.
So this water could come from a tap, or could come from a bottle. And the bottle is sold. So there is a market for bottled water, and there is a price. So is the price the same thing as the value of water?
So there is a philosophical issue that you might want to explore. And economists have grappled with that from the beginning in fact. The old economists used to talk about the value of something and the price of something as two separate things. There was a moral dimension to it and the series, obviously. So that's one thing you can explore.
You can explore about different types-- water as a product. Is it a product or service, for instance? In economic terms, for instance, a bottle of water is a product that you sell like that. But water we get from the tap is mainly a service that we get through with the water companies that have put the pipes down. And they clean up the water, and they check the quality. So we don't get ill.
And also there are different types of markets because, for bottled water, the market is reasonably competitive. There are different providers, different sellers. And they compete based on price and based maybe on brand. Some have a higher brand, better water.
Whereas the water companies are a monopoly because they have to put down all the pipes. There's not really much space for more companies locally to deliver water. So how do you deal with monopolies? Because if you're the only one providing something, you might charge really high prices.
So the government has to regulate them. So there is a policy dimension about that. How do you regulate it? Do you privatise, or do you nationalise?
More recently, in the last few decades, there's been a lot of privatisation going on. But in the past, these network industries, these industries that have physical networks that you have to put down that tend to be monopolised because of the technological base, they used to be nationalised. Also, because there are some goods that are quite important for everybody, obviously, water, we can't live without it. So there are many, many dimensions that you can explore through economics just looking at a simple glass of water.
Also, pollution and overuse of water, water is in many cases a common good. But common goods that are not owned by anybody can be overused. And in some places in the world, you see through irrigation water reserves are going down. So how do you deal with that?
There was a Nobel laureate, Elinor Ostrom, who came up with some really good answer. And I really like her work also because it's one of the very few. There are not enough women at the moment into economics because it's got an image that maybe doesn't attract women. Actually, there are some really good women economists. We used to have female professors in our department, wonderful economists. And we need more.
And the topics that economists cover are about everything, about inequality. It's about from firms to what goes on in the household. So I think we're trying to also open up economics for everybody in our degree that we're offering because we're offering now a single honours degree.
We are already offering some joint honours with mathematics or politics and business and so on. But now we have a single honours in economics. And we are trying to make it popular and interesting for everybody because economics-- yeah, you can talk about anything really from the economics lens, not just about Trump and the trade wars or Brexit.
KAREN FOLEY: No, and your example of water shows a really good way of how many issues there are and also how localised, I mean, that is. I was very much sort of mindful that a lot of this was Western ideas about water. And actually if you went to developing countries, there might be very different issues at play in terms of who has access and a right to water. So some huge, huge questions-- I can see it's very interesting.
But let's see what everyone at home said when we asked what three words do you associate with economics. Key word is money, which is fair enough, debt, complexity, power supply, financial management, lies and statistics, austerity, value change, credit, and interaction, so greed, greed - a very good one, value chains, demand. So some brilliant, really, really good points there, again, showing the diversity of what is on offer.
Roberto, I've heard that people who study economics with the Open University specifically do really, really well. They tend to get better jobs with higher pay than people who study economics elsewhere. So why is that? It can't just be because it's an amazing curriculum.
ROBERTO SIMONETTI: It's going to get better. So--
KAREN FOLEY: Yeah, wow.
ROBERTO SIMONETTI: But no, yes, there is a piece of data that's come out from the Department of Education that shows that Open University graduates in economy and economics degree earned the second highest. On average, they earned the second highest salary if you consider all universities in all the subjects. This was one year after the graduation.
And that partly reflects the fact that also OU students are a bit older. So they tend to earn. So there is that as well. But also, I think going economics, if you graduate with the Open University, you show to employers that you are motivated. You get things done. And you know, sometimes, you can feel a bit lonely, but you have the willpower and the ability to do that.
And Open University materials are used elsewhere also in other economics department. They used to use our books because they are good quality books. And we get academics from all over the world to contribute to our material. So it's not just us who wrote them. We've got an authored level credit. We've got two Nobel Prize winners that have been interviewed and that contribute to our modules.
So there are all these things. It's good to study with the Open University. And also economics, in general, has very good degrees, not only for the Open University. All the surveys show that after medicine and dentistry, economics is the second highest--
KAREN FOLEY: Because whilst money features very high for our audience, and obviously it is integral, but as you say, you know, with just showing the issues that you can look at with a glass of water, it's not just about ending up in a job with a balance sheet in an office. There are so many practical ways that you could use the skills that you learn from an economics degree to apply to various ways of problem solving and various ways of looking at the world.
ROBERTO SIMONETTI: Many economists, most of the economists don't work in finance. It's a good section. And again, economists tend to work-- the statistics reflect the fact that many economists work in finance and where there are sometimes very high salaries.
But I've been involved in setting up degree apprenticeships in economics. It's been organised by the treasury. Hopefully, it will be completed soon. And there are 10 different economics departments that are employers of economists in the government, let alone also the private sectors. There are consultancies as well.
And we were there because also there was an ex-OU student who graduated with us who thought that our material were very good. And so he wanted us there. And he works for the Environment Agency. And there are people who work for the Competition Commission.
Obviously, there was the Treasury and the Bank of England. But there are also Ofgem and other. The Department of Justice, you do not immediately associate it with economics, but there are some economics aspects also when you deal with justice. So maybe we should talk to our previous colleagues and come up with something together.
KAREN FOLEY: So you won't just end up at the Bank of England. You could end up doing very exciting things in a range of different departments just, for example, with the government, which is one case that we've looked at. So we're going to talk next to Jonquil. But because we have our challenge of economics in the everyday, let's see what everyone at home said about how might economics play a role in your everyday life.
So you can see here pensions are coming up with the biggest thing, pay rise necessary, so things that are necessary, making decisions, work, cost of goods, interest rates, cost of living, NHS, living, predicting results, and interest rates, so some really interesting things here, both in terms of I guess some of those economic goods or assets, but also very interesting about predictions and modelling and I guess the application of economics.
Jonquil, I wanted to talk to you about You and Your Money, which is DB125, which is launched from the other You and Your Money. But it's much improved I understand.
JONQUIL LOWE: Well, we've had for many years now a very successful course called Personal Finance, which is about giving you financial capability, helping you to manage your own money more effectively, but also acting as an introduction to the social sciences. So what we've done with this course is we've now put more economics in there. So we've kept all the good stuff about your own money and financial capability, but we're also now laying the foundations for your study of economics.
And you know, as we've already been talking about, economics has got very powerful ways of thought and analysis to help with problem solving. So the fit is very good. And of course, we all have to engage with money. I like the list of ideas there. You know, pensions looming very large for example.
And when we're engaging with personal finance, of course, we are engaging as the consumers in markets. So we can't escape the economy at all. The decisions that we make are influenced by changes in the wider economy. But also the decisions we make as households have a big impact on the economy.
And I actually did bring an artefact. I bought my mobile phone.
KAREN FOLEY: Right, a very everyday object.
[LAUGHTER]
JONQUIL LOWE: Well, particularly amongst the young.
KAREN FOLEY: I thought you were just glued to it, Jonquil.
JONQUIL LOWE: No, I can put it down occasionally. Look. I've brought it actually really as a kind of symbol of advancing technology because technological change is so rapid now. And it's changing the way that we engage with our money. And I don't just mean that we're all using apps these days to do our online banking, but there's this huge explosion now of big data and the internet of things, generating new data. So
That's impacting on areas, for example, like insurance, where you can have an app on your phone that monitors how safely you drive and that feeds into your insurance premiums-- great news if you're a good driver. It could be the cause of financial exclusion for people who don't come out so well on these metrics or very high premiums.
And we see the same thing with credit, you know, which again is where risk is being measured. And as data becomes more ubiquitous and more granular, then it's possible to segment people more finely. And so some people do very well out of this segmentation. They come out as low risk. They get good credit deals. But then as you work through the spectrum, there are other people who then find that actually nobody wants to lend to them, or they'll only lend at very high amounts.
So technology also drives a lot of questions about the kind of society we want to live in and whether we're happy with vulnerable consumers being excluded from markets. If we're not, then what kind of systems can we put in place? To what extent should the state step in either as a provider of services or regulating services in order to ensure that people have access to the financial services they need?
So we've seen that, for example, with the capping of the cost of payday loans. And now the regulator is looking at whether other forms of quite expensive credit, possibly even including overdrafts, which are kind of very mainstream, whether they should also be regulated in some way. So all of the time, we're engaging with our money, we're playing this part in the economy. We can't help being there within the economy and playing that role.
KAREN FOLEY: Wow, that's just so interesting because I've looked at some of the module beforehand actually. And I was thinking how brilliant it was in terms of how well structured it was to actually go through your money and start working on various things, various activities. It can be very easily applied. And I can see how students would really benefit, just financially, on their own in terms of sorting out some of these concepts.
But also, it raises so many of these bigger issues as well. So how at a level one module, when you're introducing some of these ideas, do not I guess blow everyone's mind with some of implications and ethical concerns that you've raised here.
JONQUIL LOWE: Well, I think that's right. We don't actually have the textbooks here. But I love these lovely mock-ups because we do have the cover. And I quite like this cover because, obviously, money is there because it's about money. But we've also got, you know, we've got women there. We've got different ages. It's a sort of representation of how money is just there as part of everyday life and always has been.
And by using that as a lens, I think that takes the fright out of economics, if you like, because it's got strange jargon. But you're applying it to things that are very familiar like the glass of water. So it's just a way of entering into a kind of economic way of thinking and those big questions that are raised. And I think for most people, it becomes very exciting to actually start with the everyday and what's very relevant to you, but then to expand out and see those bigger issues and the impact of the decisions that you make.
You know, for example, if we all shop online, that does have implications for people's jobs. That then has further implications for how what we produce in the economy is shared out. We're very used to people mainly getting their share of the economy through selling their labour and getting wages. But it may be that the future is very different.
KAREN FOLEY: And how quickly some of those things change-- I mean, already, in online retailing, we're seeing big, you know, household-name stores closing because of online sales. But equally, there's this whole challenge then with people buying 20 items and returning 5 that are then unsalable. And you can see that then tipping over the edge of that model for example.
JONQUIL LOWE: Yeah, and I think sometimes we don't kind of join ourselves up because we're not just consumers. You know, we're consumers. We're producers as well. And somehow, we compartmentalise ourselves.
And when we're out shopping, we don't really think about those bigger implications. But somewhere, I think we've probably got to join ourselves up, if you see what I mean, and be aware that we can have what the social sciences call agency. We can have an impact on this bigger structure that we live in, purely by those everyday decisions that we make.
KAREN FOLEY: You've got a great example as well, Cristina, of an everyday item.
CRISTINA SANTOS: I do. I'm wearing it.
[LAUGHTER]
It's a white t-shirt, not any white t-shirt. I picked one that has absolutely no brand. It's like the most inconspicuous white t-shirt one can think of. And I just checked what the tag said because one of the things that we will sort of try to do in this level one module we're producing is to kind of have people thinking kind of a bit more about where these things come from.
And so I actually checked what the tag said. And it says made in Bangladesh. And that's obviously not a straightforward statement because to get to the assembling of a t-shirt, you start off from the cotton. Right? And there's a whole production process to get here. So it's a very complex value chain. Actually, I noticed that somebody raised value chain as one of the keywords in economics. And absolutely, we will be talking about the value chains.
So if we think of Roberto as cotton, and if we think of Jonquil as the textile, obviously, the clothing because I'm wearing it, and you would be what happens after the clothing, which is all the marketing, trade, and sort of retailers. All the way to the-- we ran out of people, all the way to the consumers.
KAREN FOLEY: Everyone at home are the end-users.
CRISTINA SANTOS: There's a lot of issues here about what made in Bangladesh means because cotton producers, China, US. Textile, we have two very different sort of polarised types, which is Nepal, Pakistan, India, or US. And now UK is trying to get into the race. Northern England has kind of very high tech sort of weaving and spinning industry kind of being revamped after the collapse a few generations ago. So we have developing countries' textile and very developed countries' textile.
Then there's clothing. Bangladesh is definitely a key actor in that, but it exports most of what it produces. Over 80% of the white t-shirts Bangladesh produces goes elsewhere. So made in Bangladesh actually means just getting the textile, mostly through sweat shops, and turning these into t-shirts and then passing them on.
And the reason why this raises a lot of issues about economics I will kind of try to summarise a few key ones that we'll be looking at. One is for instance data clearly shows that the average wage of a worker in the clothing industry is much, much lower than the average wage of a worker in the textile industry. So it kind of immediately starts making you wonder about-- and that, by the way, even when we're just focusing on developing countries. So I'm not comparing the average wage in the US, but the other extreme-- Nepal, India, and Pakistan. So why would it be that there's such a sharp difference in terms of average wage of the workers working on this stage of the production than on that one?
There's lot of questions there about how industries evolve and what are the characteristics of the product itself they're producing. What are the governmental and policy context that kind of makes industries lean more towards cheap labour strategies or production processes or something which is likely to be more capital intensive or neither sometimes? So there's a big issue there about trying to understand how different firms and different industries end up choosing certain production pathways.
And another probably more concerning issue is, if we think made in Bangladesh, we probably think then Bangladesh might be the country that is benefiting most from the sale of this t-shirt. But actually, when we look at the data via the value-- and I'm using the word value again with slightly different nuance from the Roberto used it earlier-- the value added or created by this stage of the production is actually much, much lower than that stage.
So made in Bangladesh does not mean in any shape or form that Bangladesh is benefiting more in terms of wealth created or in terms of expansion of the economic activity than Nepal, Pakistan, and India, or the US and UK would be having more of a wealth expansion than Bangladesh, just looking at the data. So there's issues there about success, right, measures of success, and relations between what our expectations, in terms of how things are done, and what that actually translates into.
KAREN FOLEY: And so staging some of the issues, so this is for a module that's going to be available next year, DD216, Economics in Context. So you can see again how you're using a really practical, tangible idea and showing some of the various issues. But I guess this is more focused on a trade and practical sort of aspect in terms of wages, processes, and who's really balancing, et cetera.
CRISTINA SANTOS: Yeah, it is. I mean and we can go on. Right? There's the issue to do with different agents playing a role here. If we actually now think about the consumers, and if we're still focusing on Bangladesh, if we have more than 80% of these white t-shirts being exported, what happens to the local markets of clothing? What happens to the preferences for local clothing or the preferences for white t-shirts of consumers?
And in what way do these changes in terms of consumers' consumer preferences sort of shape the markets and shape the way the prices are kind of created? And what can we learn from observing the market about the behaviour and incentives of producers and the whole value chain? And what's happening with consumers?
So there's lots of kind of raising awareness about our every day. It's putting them in context about our everyday choices about what we wear and the economic agents at play in all of these decisions really.
KAREN FOLEY: It sounds brilliant. I just want to take a quick trip to HJ and Damon.
HJ: Yeah, we've got a lot of great chat. And we're picking up on quite a few interesting threads about especially what Jonquil said about data driving what's happening in economics, personally as well. So Davin made the point that we're all affecting economics just by what we're doing, whether or not we're going to be offered a loan, or whether or not a local business might come to the area by the effect we're having just over information. And Julienne is enjoying the chat. She said it's good to connect my studies, and she's focusing on environmental studies and relating it to the global economy.
And we're also thinking about like what we heard the power the consumer has. So we're talking about shopping locally and what decisions we make there. And actually, we can have a big influence on that front as well.
DAMON: And the issue of shopping online versus shopping locally, whether you still use a big chain like Tesco or your local butchers, and the impact that the individual can have on wider issues like buying a t-shirt from Bangladesh. So yeah, people are recognising the importance of their own activities.
KAREN FOLEY: It sounds like a brilliant chat and, again, really showing the diversity of economics and the value. Well, I'd like to end by I brought a final item. I'd like you to tell me about how that's got something to do with economics and the every day, which is my shoes.
JONQUIL LOWE: Lovely colour.
KAREN FOLEY: Thank you. Thank you, Jonquil. So how are they relevant to economics and the every day? Where were they made? Come on. That's the first question.
CRISTINA SANTOS: Absolutely amazing story about global value chains, and the key players have been shifting brutally over time. And there's something about putting ourselves into other people's shoes. Right? A lot of what we do in economics is sort of picking a perspective, you know, and sort of modelling that behaviour and seeing how that contributes to the wider picture. So both in terms of methods and in terms of practical implications, that's a great example, plus the gendered nature of that both in terms of female workers and in terms of consumers.
JONQUIL LOWE: Well, that's true with the high heels. That's right. There might also be a conspicuous consumption angle. I'm not going to ask you if you've got red soles, but--
[LAUGHTER]
CRISTINA SANTOS: No brands, no brands.
KAREN FOLEY: Other shoes are available.
[LAUGHTER]
JONQUIL LOWE: But some of our decisions are made because we want to use the symbolic value of the things that we buy and wear. So it might be that we're trying to signal that actually we're rather well off and rather proud of that. Or maybe you're signalling that you belong to a certain tribe. Is there a kind of turquoise shoe tribe?
KAREN FOLEY: I'm just in their national [INAUDIBLE]. It's not like I'm in psychology.
[LAUGHTER]
Right, and Roberto, what would you say?
ROBERTO SIMONETTI: Well, it made me think about a story that circulates in business school about sellers of shoes and salesman that go to developing countries where nobody's wearing shoes. And this story is about one of the salesmen that reports back we've got a great market here. And the other one said, nobody wears shoes. So we won't sell even a single one.
KAREN FOLEY: And good point.
ROBERTO SIMONETTI: It's also about entrepreneurship and how you can make markets rather than fit into. And who has power? The producers by maybe not forcing, but revealing something that you might want, but you don't know, or the consumers by saying, I don't need shoes.
KAREN FOLEY: Everyone needs shoes. Right, thank you very much for a really delightful session that I think has been really provocative for our audience at home as well and showing how economics in the everyday is really relevant and raises so many different issues. So thank you, Cristina, Jonquil, and Roberto, for that session.
We're going to have a short break now. We're going to show you a video about the OU music BA. And then we're going to be back talking about that very qualification after that video. See you in a few minutes.
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