Investigating Social Issues
ECONOMICS TODAY Edited by Andrew Leake The Economics Today series surveys contemporary headline topics in applied economics. Each book in the series is written by an expert in the field in a style that is fluently readable. It serves the student of introductory economic principles while also making the subject accessible to a more general reader. The series embraces the problem-solving skills of the new generation of students and stresses the importance of real-world issues and the significance of economic ideas. Published Andrew Leake: The Economic Question Jean-Louis Barsoux and Peter Lawrence: The Challenge of British Management S. F. Goodman: The European Community Jenny Wales: Investigating Social Issues Forthcoming Frank Burchill: Labour Relations Series Standing Order If you would like to receive future titles in this series as they are published, you can make use of our standing order facility. To place a standing order please contact your bookseller or, in case of difficulty, write to us at the address below with your name and address and the name of the series. Please state with which title you wish to begin your standing order. (If you live outside the UK we may not have the rights for your area, in which case we will forward your order to the publisher concerned. ) Standing Order Service, Macmillan Distribution Ltd, Houndmills, Basingstoke, Hampshire, RG2l 2XS, England.
INVESTIGATING SOCIAL ISSUES Jenny Wales M MACMILLAN
Jenny Wales 1990 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copymg Issued by the Copyright Licensing Agency, 33-4 Alfred Place, London WC1E 7DP. Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages. First published 1990 Published by MACMILLAN EDUCA non LTD Houndmills, Basingstoke, Hampshire RG2l 2XS and London Companies and representatives throughout the world British Library Cataloguing in Publication Data Wales, Jenny Investigating social issues. - (Economics today). I. Economics, related to sociology I. Title II. Series 330 ISBN 978-0-333-51832-8 ISBN 978-1-349-21063-3 (ebook) DOI 10.1007/978-1-349-21063-3
Contents List of Tables and Figures x 1 What Do We Have Government For? 1 What Are the Choices for Government Expenditure? 2 How Much Should the Government Spend? 2 What Has Happened in the UK? 4 What Is the Government Trying to Do? 7 Why Should the Government Interfere with Market Forces? 10 Does the Market Always Give the Best Allocation of Resources? 13 How Can the Government Intervene? 15 2 Housing 18 The Benefits of Housing to the Economy 20 Social Costs 22 Government Strategies to Encourage Home Ownership 23 Reviving the Rented Private Sector 27 Developing Housing Associations 29 Housing Action Trusts 30 The Future Demand for Housing 31 Could More Government Spending Help? 33
vi Contents 3 Education 34 The Benefits of Education 35 Educating for Change 35 Cost-Benefit Analysis 37 Counting the costs 38 Balancing the benefits 38 Input-Output Analysis 41 Vouchers: The Market at Work 42 Grants v. Loans 45 What Is Fair? 47 Sponsorship 48 Compacts 50 The Future 50 4 Health: Who Waits, Who Pays? 52 Why Is There a Problem? 53 Is Health Care Important 56 How Does the British System Work? 57 Do Other Countries Do Better? 59 USA 60 France 61 Has Anyone Found the Solution? 63 What Are the Alternatives? 64 A 'free' service 64 Voluntary insurance 65 Compulsory insurance 66 Public-private partnership 68 Health Maintenance Units 70 Internal market 71 Is There a Perfect System? 72 Ethics and Practicalities 74 5 Conservation and the Environment 76 Are Economic Growth and Conservation Compatible? 76 Why Do Firms Not Comply with the Law? 76 Water 78
Contents vii Green Belt 79 Is it worth it? 80 Environmental Issues 81 Acid Rain: A Continuing Problem 82 The problem 82 The cause 83 The cure 84 The costs and benefits 85 The Channel Tunnel: The Impact of a New Development 86 Is it worth it? 88 The decision 91 Do We Make the Right Decisions? 91 6 7 The Inner Cities 93 The Cities in Riot 93 What Can Be Done? 95 Task force to the rescue? 96 Compacts 97 Government assistance 98 The London Docklands: A Large-scale Development 99 The New Docklands 100 Unemployment 101 Housing 103 Local democracy 104 Has it worked? 105 Wigan Pier: A Small-scale Development 106 Costs 108 A Comparison? 108 Regional Policy 110 Unemployment Standard of Living 111 111 Migration 115 Investment 116 A North-South Divide 117
viii Contents Industrial Location: Influences on the Existing Pattern 120 Regional Policy 121 Regional Policy: Past and Present 121 Policy in the past 121 Policy in the 1980s 123 An Imperfect Economy 124 Do We Need Regional Policy? 126 8 Income Distribution 128 Why Do Such Disparities Exist? 132 Labour market demand 132 Changes in supply 134 Trade Unions 136 Minimum Wage Legislation 138 Taxation 140 Benefits 141 Imperfections and the Individual 142 Wealth-a Source of Inequality 145 The Problem: Poverty 146 Can We Achieve Equity? 148 How Can Income Be Redistributed? 150 9 Transport 152 Roads 153 The Way Forward 154 Increasing supply 157 Reducing demand 158 The Railways 159 The Future 160 Investment 160 Privatisation 161 Road v. Rail: The Costs Competition or Integration? The Problem 166 163 164 How can demand be reduced? 167 Can supply increase? 168
Contents ix How can current resources be used more effectively? 169 A Free Market for Buses? 170 Has Monopoly Power Been Removed? 170 What has happened to prices? 171 Has efficiency improved? 173 What has happened to subsidies? 173 On the Right Tracks 174 10 Success or Failure? 176 Does Economic Theory Really Help Decision-making? 176 What should be included? 176 How do we measure value? 176 Who reaps the benefit, who pays the cost? 178 When do we count the costs and benefits? 178 Social Policy: Enterprise Culture v. the Nanny State? 179 Can the Market Work? 180 Can the Government Do Better? 182 Which Works Better? 183 Index 185
List of Tables and Figures Tables l.1 Spending under Labour and Conservative Governments 5 2.1 Owner-occupation in Europe 24 2.2 Building Society Repossessions 26 3.1 Who Stays On? 51 4.1 Has Spending Power Really Increased? 54 4.2 Patients Treated 55 4.3 International Comparisons 59 4.4 The Elderly are Expensive 64 6.1 The Labour Force in Docklands 101 6.2 Unemployment in Docklands 102 6.3 Job Creation in Docklands 103 7.1 Unemployment, 1983-8 112 7.2 Regional Differences in Standard of Living 113 7.3 Inter-regional Movements 115 7.4 Business Registrations and Deregistrations 116 7.5 Manufacturing and Service Industry 119 8.1 Distribution of Household Income 130 8.2 Weekly Earnings for Adult Males 131 8.3 Below-Average Household Income 135 8.4 Women's Earnings Relative to Men's 142 8.5 Distribution of Wealth 147 8.6 Consumption and Expenditure on Food 148 9.1 Costs of Congestion 155 10.1 The Most Important Things in Life 179 10.2 Environmental Issues 181 x
List of Tables and Figures xi Figures 1.1 Comparative Government Expenditure 3 1.2 General Government Expenditure 5 1.3 General Government Expenditure in Real Terms 6 1.4 Equity and Efficiency 7 1.5 Total Social Costs and Benefits 8 1.6 Marginal Social Costs and Benefits 9 1.7 Elastic Demand 12 1.8 Inelastic Demand 13 1.9 Ignoring Costs of Pollution 15 2.1 Time-lag in Building Houses 20 2.2 Subsidy on Home Ownership 25 2.3 Rent Control 28 3.1 Economies of Scale 39 3.2 Higher Education 46 3.3 Grants and Loans 47 4.1 Spending on the NHS 53 4.2 Tax Relief and Private Health Insurance 65 4.3 Setting Price Too High 67 4.4 Shared Resources 68 4.5 Effect on Costs of Economies of Scale 71 5.1 Decline of Trout in Loch Fleet 82 5.2 Sulphur Dioxide Emissions 83 5.3 Channel Tunnel 89 6.1 House Prices 104 7.1 GDPPerHead 118 7.2 Production Possibility Curve: Wasted Resources 122 8.1 How Many People Should the Firm Employ? 132 8.2 Shift in the Demand Curve for Labour 134 8.3 Creating Excess Demand 137 8.4 Effect of a Minimum Wage 139 8.5 The Laffer Curve 140 8.6 Unemployment Rates and Qualifications 143 8.7 Wages Equal Economic Rent 144 8.8 Wages Equal Economic Rent Plus Transfer Earnings 145 9.1 The Growth of Motorway Traffic 153 9.2 Future Road Development 156 9.3 Car Ownership 158 9.4 Rail Travel 159 9.5 British Rail Investment 162
xii List of Tables and Figures 9.6 Costs and Benefits of Road Construction 164 9.7 The Private and Social Costs of Car Ownership 165 9.8 What Has Happened to Output? 172 10.1 Consumer Surplus 177