Challenging economic theory at the IEA conference

Thursday 24 November 2022

In recent years, Economics students at Emmanuel College have travelled far and wide to attend the Institute of Economic Affairs’ (IEA) sixth form conferences.  This year, as host school, we had the pleasure of welcoming fantastic speakers alongside staff and students from local schools, including The King’s Academy, Middlesbrough.

We were joined by Dr Juan Castaneda (https://iea.org.uk/authors-info/dr-juan-castaneda/ ) and Dr Kristian Niemietz (https://iea.org.uk/dr-kristian-niemietz/) who addressed the following topics i) How money is created in modern economies; ii) the Eurozone and the gold standard; and iii) Social Health Insurance: an alternative to the NHS?  It was a fruitful few hours in which students in Years 10 to 13 were able to revisit some of the fundamentals of economics and look far beyond the taught curriculum.

Given the current cost-of-living crisis, it was helpful that Dr Juan considered the theoretical link between growth of the money supply and inflation.  Inflation is defined as a sustained rise in the price level.  It is measured by the Consumer Prices Index (CPI) and UK CPI recently climbed to 11.1%.  Narrow money, also known as the monetary base, is controlled by the central bank.  A number of economic theories cite the relationship between growth of the money supply and the subsequent rise in the rate of inflation.  However, as students of Economics, particularly GCSE and A level students, it is important to question economic theory.  During the financial crash of 2008, the central bank of America, known as the Federal Reserve, substantially increased the monetary base, yet inflation rates fell; indeed, for a short time, the US experienced deflation.  Never take it as read that economic theory always plays out in the real economy!

Reflecting on the visit, Year 13 student Felix Blackman said that the conference was “a great opportunity,” and that he particularly enjoyed “meeting other enthusiastic economists from schools around the country”.