This past Sunday’s Economics Masterclass aimed to equip students to explore the economic forces which govern so much of our daily lives. Through a mixture of teaching, discussion and structured debate, the group gained a nuanced appreciation of economic policy-making. Primarily they explored the effect of incentives on the decision-making of a range of actors from government to companies to the end consumer.

We began by looking at how market mechanisms function in allocating resources, and how they fail to do so in a socially optimal fashion in certain conditions or in markets for particular kinds of good. For me, a particularly interesting discussion centred on unpacking the numerous reasons why healthcare would be underdemanded under purely free market conditions. We explored policy solutions for market failure and their drawbacks, before concluding the morning with an interactive, group-based exercise whereby students had to consider the privatisation of various industries and how government and firms should interact in providing them so as to maximise welfare.

In the afternoon we broadened our focus beyond individual markets, beginning with an examination of the causes of absolute and relative poverty and potential policy solutions. We then turned to the macro-economy, and students gained the theoretical tools to understand the make-up and functioning of the current recession. The whole day was rounded off with three debates on key macro policy issues: the structure of the tax system, central bank independence and, especially topically, how we choose to finance our country’s deficits. The students showed a capacity to reason their way to distinctive and imaginative conclusions and to defend and criticise these conclusions. By moving beyond the standard arguments of exam-oriented school courses, and examining the value judgments lying behind economic proposals, students got closer to the real world logic of economic practice – deepening their understanding of how markets and incentive structures function..

Find more information about our Economics and Finance events here.