The first prize in economics was awarded in to Ragnar Frisch and Jan Tinbergen "for having developed and applied dynamic models for the analysis of economic processes". Awards to non-economists[ edit ] In Februaryfollowing acrimony within the selection committee pertaining to the awarding of the Prize in Economics to John Forbes Nashthe Prize in Economics was redefined as a prize in social sciences.
The UK household-sector puzzle: A low saving ratio but fragile confidence The latest consumer confidence figures from the European Commission point to consumer confidence in the UK remaining at around its long-term average.
Despite this, confidence is markedly weaker than before the outcome of the EU referendum. Yet, the saving ratio, which captures the proportion of disposable income saved by the household sector, is close to its historic low. We consider this apparent puzzle and whether we can expect the saving ratio to rise.
Chart 1 shows the consumer confidence indicator for the UK. The long-term average median of —6. In October the confidence balance stood at —5. While above the long-term average, recent values Business economics discussion questions a weakening in confidence from levels before the EU referendum.
Click here to download a PowerPoint of the chart. Chart 1 shows two periods where consumer confidence fell markedly. The first was in the early s. In attempting to staying in the ERM, the UK was obliged to raise interest rates in order to protect the pound.
The hikes to rates contributed to a significant dampening of aggregate demand and the economy slid into recession. Britain crashed out of the ERM in September The second period of declining confidence was during the global financial crisis in the late s.
The retrenchment among financial institutions meant a significant tightening of credit conditions. This too contributed to a significant dampening of aggregate demand and the economy slid into recession.
Whereas the recession saw the UK national output contract by 2. Nonetheless, a fall in confidence, whether it amplifies existing shocks or is the source of the shock, is often taken as a signal of greater economic uncertainty.
If we take this greater uncertainty to reflect a greater range of future income outcomes, including potential income losses, then households may look to insure themselves by increasing current saving. It is usual to assume that people suffer from diminishing marginal utility of total consumption.
This means that while total satisfaction increases as we consume more, the additional utility from consuming more marginal utility decreases. An implication of this is that a given loss of consumption reduces utility by more than an equivalent increase in consumption increases utility.
This explains why people prefer more consistent consumption levels over time and so engage in consumption smoothing. Hence, saving which acts as a from of self-insurance in the presence of uncertainty is known as buffer-stock saving or precautionary saving.Indecision and delays are the parents of failure.
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