Today is the EU Referendum!

Today is the day! Throughout the UK, millions will be putting their votes in between 7am and 10pm to put forward their view on whether Britain should stay in the European Union, or leave.



If you are eligible to vote, it is incredibly important to do so- the right to a vote is something we should not take for granted and we should exercise as much as we can. Whether you think Britain should stay or go, get out there, brave whatever weather you're confronted with, and VOTE!

And if you're still undecided? Well, we've got you covered.

If you'd like to hear why perhaps Britain would be BETTER IN THE EU, check out our article by Chris Hawes:
Want To Save Britain's Economy? Vote To Stay In Europe.

If you'd like to hear why perhaps Britain would be BETTER OUT OF THE EU, check out Matt Walton's article:
Mythbusters: Brexit Edition

And if you'd like to hear why perhaps this vote shouldn't have happened in the first place, check out Tom Goldsworthy's recent post:
Forget 'Leave Or Remain' - The Brexit Referendum Should Have Never Been Called In The First Place

Of Galleons and Goblins – Gringotts as a Financial Institution

In our imaginations, Gringotts is the quintessential bank. It is well constructed, has vaulted hallways and is full of gold. When you want to explain to a young reader with little experience of financial affairs roughly what a bank is (as Rowling did), you would say it is a safe place to put your money, accessible when required. As Hagrid quipped, ‘yeh'd be mad ter try an' rob it’.

But does Gringotts fulfil the roles of a financial institution as we would understand it today? That is to say; does it serve the wizarding community by efficiently allocating their capital, earning income (i.e. via interest) in the process? Do wizards even need a conventional financial institution, or are they happy with a very large vault to hold their gold coins?

Financial Institutions - a recap (I'll keep it brief!)

Financial institutions allocate capital by transferring money from lenders (i.e. the bank’s depositors), who have less immediate need for it, to borrowers, who have more immediate need for it. The ‘techy’ term for this is credit creation and it is most commonly achieved via the loan system, residential mortgages being the best-known example here. Borrowers pay a higher rate of interest, lenders receive a lower rate, and the bank takes a cut.

Credit creation should boost economic growth by allowing value-enhancing projects to occur more quickly than they otherwise would have done (imagine how long it would take you to save for a house before you could buy it outright!), and it is a signal of confidence in the economy. Along with such things as an independent legal system and an exchangeable currency, credit creation is considered a cornerstone of modern economics.

Do the Weasleys need a mortgage?

If wizards could use magic to make anything, then presumably they would not need money. They could ‘magic’ all their required items and so scarcity would not exist. The absence of scarcity would also render unnecessary the study of economics (err…yay?)** as the study of choice optimization in a world of limited resources.

In the Potterverse, scarcity still exists. Rowling tells us it is so via Gamp’s law, which essentially says that you can’t make something out of nothing. So we can assume that magic, like technology, acts as an enhancer to underlying economic fundamentals. It can accelerate and polish, but it cannot add or remove.

Wizards, therefore, must work for a living (cue niche jobs such as quidditch players and curse breakers). It also follows that their wants and needs are not satisfied by their current incomes because if they were, the Weasley children would not need to buy second-hand school books. So there is demand for credit in the Potterverse, which probably means that the Burrow (the Weasleys’ house) has a 95% Loan-to-Value mortgage. Such high ‘leverage’ would be problematic for the Weasleys if they couldn’t cover their interest and capital installments, the consequences of which we are all familiar with given recent economic history.

Yes they do...and that's where Gringotts steps in 

Clearly Gringotts makes an income, how else can is Goblin owners pay their staff and feed those massive dragons?

They would probably earn some income from vault fees, and from the actual process of minting coins (called Seigniorage, basically 'taking a cut off the top'). However, in an economy where Gringotts is a state-sanctioned monopoly over a critical industry, it seems likely that the Goblins would engage in credit creation if there were demand for it. The rewards would be too lucrative to miss!

Indeed Rowling gives us one example of money-lending in the Potterverse, where Ludo Bagman (the Tri-Wizard cup organiser) borrows money from the Goblins at an usurious rate for gambling activities, in what looks to be the first wizarding payday loan. Nonetheless wizards don’t seem to be overly fond of banking; otherwise they would presumably manage Gringotts themselves.

What's with all the gold coins?

But how can the Goblins lend money when the stock of money seems fixed? A key requirement for credit creation is flexibility in the money supply. That is to say, if Gringotts has 100 Galleons deposited by savers, they cannot loan out all 100 (thereby maximizing their income from interest) whilst keeping 10 galleons in reserve for savers' instant access.***

In the real world, the money supply problem was historically solved by banks issuing their own notes, backed by the gold or other assets they had in their vaults. The process was eventually transferred to central banks to prevent over-issuance of notes (thus leading to inflation). Scottish banknotes are a hangover of this old practice, although today they are bound by the Bank of England’s monetary policies.

It seems likely then that Gringotts follows a similar process. They must either make coins when they need them to lend, or they must issue notes backed by the Galleons in their vaults. But as we said, Rowling tells us that you can't make something from nothing, and mining gold must be time-consuming even for magical beings like Goblins.

Credit creation, on the other hand, needs to be immediately responsive to consumer demand. So when the Weasley children need new school books, they don’t have time for the Goblins to mint some new coins. A better banking solution would be for the Goblins to loan them some pre-existing Galleons from say, Harry's vault, and replace those with a note that says 'Gringotts owes the bearer of this note (currently Harry) X amount of Galleons'.

And if Harry were willing to take that note instead of Galleons buy a new Firebolt broomstick, and it was then used by the Quidditch shop to pay their suppliers and so on, then the note has been accepted as a medium of exchange. In other words, it is money too!

Exchanging confidence for notes...now what’s the spell for that? Creditum facere?

PS - I am aware that there are a lot of technical arguments around credit creation, its inflationary effects and whose responsibility it ultimately is etc (Central Bank vs commercial banks), which I didn't have a chance to address here so please excuse any omissions.

** Response of Economics undergraduates when polled on this issue.

***Contact me if you would like an explanation of how this process, called Fractional Reserve Banking, works using zero technical terms!

This is part two of a poponomics series on 'Potternomics'- the economics of Harry Potter. Check out the first part here. 

Forget 'Leave Or Remain' - The Brexit Referendum Should Have Never Been Called In The First Place

With just under a week to go before the vote on the question of Britain’s membership of the European Union, the country is reaching peak referendum fever. 

However, amongst all the hype and excitement, it appears that nobody has stopped to pause and ask a far more fundamental question: whether we should be having this referendum at all. Politicians and political commentators from all sides have hailed the referendum as a fantastic symbol of the strength and vibrancy of our political system. In fact, this referendum is a cynical political ploy which will serve to undermine our system of representative democracy. The referendum was tactically motivated and its merits ill thought through. We should never have called this vote in the first place.

Firstly, let’s immediately demolish this idea that the referendum is some noble expression of our democracy. It’s not. The referendum was included in the Conservative Party’s 2015 election manifesto as an attempt to diffuse the populist threat posed by UKIP. It was a cold political calculation, a cynical attempt to shore up support amongst the party's traditional base. Although some claim that the referendum was called because of the importance of the issue being debated, this is clearly false. None of the most important questions in our democracy’s history were put to referendums. Whether to go to battle in the first world war, or the second world war, or whether to invade Iraq. Nor were referendums held over which economic policies to adopt during the great depression, or the more recent financial crisis of 2008.

There is a very good reason why these huge, seismic political issues were not put to referendums. It is because we, as a nation, have chosen to abide by the principle of representative democracy. The basic idea is simple: every few years we vote in a general election where we choose representatives who vote in parliament on our behalf. These representatives have the time, resources and expertise to discuss, debate and understand the complex issues and public policy questions of the day. As such, they’re much better placed to vote on these questions than we are. And, of course, MPs must have their constituents’ interests at heart because they know that they may well be voted out of office at the next election. Well, that’s the idea at least.

This argument for representative democracy seems particularly applicable to the question of our membership of the EU. It seems bonkers to leave what is undoubtedly an incredibly complex and multi-faceted question to the direct votes of the general public. Who really has the time or expertise to pour through and weigh all the evidence on both sides of the debate? Are we, the people, really better placed to decide this monumentally tricky issue than our elected parliament?

Moreover, the complexity of the issue at hand renders a referendum completely inappropriate in this instance. It is simply not possible to reduce such a challenging and complex issue to a simple yes or no question. With so many competing visions of our post-Brexit future, what does a vote to leave the EU even signify? Does it entail us joining the EFTA, or the EEA, or leaving the single market altogether? This is far from clear. In the event of a leave vote, should we hold another referendum, or should we leave it up to MPs to decide? But what if MPs (approximately two thirds of whom support Bremain) decide to follow the model of Norway, who are outside of the EU but remain inside the single market through membership of the EFTA? Norway must accept the free movement of people and make contributions to the EU budget, but regaining control of our borders and the infamous “£350 million a week” we supposedly send to the EU (we don’t really, but that’s been discussed enough already) have been two of the key arguments propounded by the leave campaign. The inevitable public backlash that would ensue if MPs took us into the EFTA following a leave vote would raise serious constitutional issues. Are the people or parliament ultimately sovereign; who should reign supreme?

Another issue with the referendum campaign is that it has, at times, felt as if we were debating another question entirely. Namely, who should be the prime minister, rather than the question of our membership of the EU. The campaign has seen a huge focus on personalities and individual ambitions, rather than the substantive issues we should instead be discussing. But this is a consistent theme throughout referendums in the UK. During the Lisbon Treaty referendums in Ireland, abortion and conscription became major issues. During the "yes" campaign for the 1997 Welsh devolution referendum, an aeroplane flew across Wales with a banner which read, “Vote Yes, Vote Blair”. Referendums often become about something entirely different to the real question at hand.

I hope it is now clear that there is a very strong case to be made against the idea that we should be having this referendum at all. But you would think that, with such a multiplicity of issues and problems with the very idea of holding this referendum, some sort of parliamentary committee might have thought to investigate the use of referendums in the UK before we called this vote. Well, you’d be right! In fact, the House of Lords Constitution Committee looked at the merits of the use of referendums back in 2010, weighing the evidence on both sides before concluding that:

“The balance of the evidence that we have heard leads us to the conclusion that there are significant drawbacks to the use of referendums. In particular, we regret the ad hoc manner in which referendums have been used, often as a tactical device, by the government of the day.”

The committee identified all the never-ending problems with the use of referendums outlined in this article, and more, before reaching the same conclusion that I have. It is abundantly clear that the EU referendum was inappropriate and misguided - a bad idea from the outset. It has undermined the axiomatic premise of the sovereignty of parliament and corroded our representative democracy.

The US Gun Dilemma

America have a serious dilemma on their hands, that no-one feels prepared to confront, says guest writer James Dancey.






It doesn’t take an idiot to realise that lack of gun regulations in the USA causes more shootings than in nearly every other country in the world.

Its homicide rate sits at over double that of other similar first world countries including Canada, Australia and the UK. 60% of those homicides are firearm contributed, no example of ridiculously easy access to firearms could be more emphasised than the recent disgraceful  homophobic terror attack on the Pulse Bar in Orlando, Florida.

Allow me to present to you a gentleman, this gentleman is Omar Mateen. He has been investigated twice for terror related incidents, he was reported to have been in a violent and abusive relationship with his ex-wife, he had to quit his job as a security guard due to aggressive tendencies, was kicked out of the police force and was also a steroid abuser. Would you give this man a gun? Of course the clear answer is no. So why was he, of all people allowed to purchase such dangerous and clearly fatal weapons?

Gun ownership in the USA (wonderslist.com)

Well because it’s land of the free, where any maniac is ‘free’ to buy a gun, and ‘free’ to commit mass homicide. Donald Trump was quick to point out that he was ‘right’ about Islamic terrorism. Now, I’m not doubting that extremism is a threat in people’s every day lives. But Mateen, was born in the US, no amount of Trump’s imposed immigration control could’ve stopped him. The only way you could’ve stopped him from committing such an atrocity is to prevent him from having access to the artillery in the first place.

Trump frequently references the second amendment on gun control, it’s strange how people are always so keen to defend an outdated piece of literature when it’s convenient for them. The idea of amendments is that they are not set in stone. A good example is the 21^st Amendment that wiped the 18^th Amendment off the books.

But of course, Congress are not interested in that, American gun retailers bring far too much money into the US Economy. In fact whenever a mass shooting occurs gun sales skyrocket which is fantastic for those businesses and their shareholders who benefit off the fear that the public hold, a fear that the next terror attack could occur in their downtown coffee shop or their children’s school. A fear that is completely justified as they are well aware these demented individuals can also get their hands on the very same weapons.

Let me say that there are no reasonable arguments for maintaining the status quo as this situation is the perfect example of what is bound to happen on an increasingly regular basis as tensions in the US rise, public paranoia and an AR-15 is not a good combination. 

Many people argue that the only option is to introduce new, harsh laws for gun control. Now I’m obviously for these suggestions, however, this does actually present a new problem. How do the Government take all these weapons that they would outlaw off the public who own them? How much domestic instability will it cause?  Surely the most delusional individuals who feel possessive over these weapons would be the most dangerous, and in return would the general public feel prepared to give up these weapons if they feel their way of life would be threatened if they did by these psychopaths.

Unlike other countries like Canada, the UK and Australia the US is absolutely huge and having it being run from such a centralised position makes it so hard to control weapons.  I fear that a harsh, immediate, reactionary law could actually cause more damage than prevent it. As proven with the futile Iraq, Libya and Syria situation we must never put the motion into emotion.

In my opinion the only way to bring about change is to ease it in gently, if you present an idea too rigidly you can often face backlash. There is still a large amount of the US population who have to be convinced that gun control is the right option despite all these horrifying shootings.

Slowly introduce laws that sanction those who are on the more unstable side of society such as criminals and just let it slowly branch across. I believe we’d see the results and people would begin to buy into the idea that actually gun control would be good. However, when people have been living with the status quo for centuries it can be hard to challenge it. But with all that said, if there’s one thing we should believe in, it is change.

Norway To Ban New Fossil Fuel Cars By 2025: What Effects Will This Have?

Rumours are abound that Norway will outlaw all sales of new fossil fuel-powered cars by 2025- how will this impact the country, its people and its businesses?

Tesla Model S (Image: caricos.com)

A lot of Norwegians own electric cars. 24.4% of all new cars sold in Norway in the first 3 months of 2016 were plug in electric cars- that's pure electric, not including hybrid cars. This is rapid shift away from traditionally powered cars towards electric is just part of Norway's environmental drive (they were also the first country to ban deforestation), which through effective incentivisation has resulted in the Scandinavian nation becoming the world's leader in electric car usage.

So if any country were to ban fossil-fuelled cars in the near future, Norway would be it- but, other than the typical environmental effects, what would be the impact of such a law?

Firstly, it'll be a massive win for some car companies, especially Tesla (whose entire lineup is electric) and Toyota (another leader in electric, and now hydrogen, technology). It's no surprise that Tesla founder Elon Musk immediately tweeted out a message saying "You guys rock" to the Norwegian government upon hearing the rumours. While other manufacturers do make cars that will still be eligible for sale, no doubt these two in particular will have a bit of a head start due to the proliferation of electric power already in their range of cars.


Other companies will have to buck up their ideas, and accelerate their shift away from petrol and diesel. It is highly unlikely that Norway's law change will provoke a revolution in the car industry and lead to a complete redirection of existing strategies, but electricity and other alternative energies are already likely to be in the future plans of most firms due to the inevitable oncoming demise of fossil fuels.

But they will have to improve their current efforts. BMW, for example, does produce hybrid and PHEV versions of its most popular 3 Series model, but sales are incredibly low, largely due to the high prices. For Mercedes, Audi, Nissan and many other companies it's the same story. These firms will have to devote increasingly more effort in both innovating alternative fuelling technologies and also in making these cars more affordable. BMW has already embarked on this journey, with its new 'i' series of cars- but even for them, it's early days.

These carmakers will have to step in by 2025, because Toyota and Tesla alone cannot cover all the bases and demands of the Norwegian people. They will certainly try, but many people will remain loyal to other brands and demand that they be catered to, post-ban.

An interesting issue arises when you consider what happens to companies that are unlikely to be so receptive to electric power. This is hardly going to be a headline issue, because it concerns very niche manufacturers such as Lamborghini, but it does raise the possibility of many Norwegians hopping across the border to purchase a petrol or diesel car and bring it home.

The used car market may also receive a boost. The ban is expected to only affect sales of new cars, and considering that electric cars are generally pricier than their fossil fuel equivalents, many people with less money to spend will be forced to resort to the used market.

Consider the effects of this new law on the fuel industry in Norway. Thanks to the North Sea, its economy benefits hugely from oil consumption, so it seems counterproductive that Norway would risk damaging its own revenues by banning fossil fuel cars. However, the Norwegian government knows its stock of oil will not last forever. It has begun weaning itself off oil, and this is a part of that process. It's a move that may have minor short term negative repercussions, but arguably in the long term is the most sensible, as it reduces the risk of any massive future crises.

On a more local level, petrol stations will also have to adapt. They will not close down (fossil fuel cars will remain on the road), but we may see an increase in the trend of electric charging points opening up at these stations, eventually (in the long long run) replacing petrol pumps.

Could the traditional petrol station become a thing of the
past in Norway?

However, it's not a simple case of adding charging points alone. Charging an electric car can take hours at most, so resting areas will have to be provided, like lounges or coffee shops. This will be a further cost to petrol sellers, but will benefit popular coffee retailers and may ultimately create new jobs.

It's key to remember though that there's one crucial determinant of all that we've talked about, and that is the rate of innovation in electric and alternatively fuelled cars. For example, if electric cars can by 2025 charge in 2 minutes, or if hydrogen cars (which fuel in the same time as a petrol car) becoming popular, the last paragraph may be completely incorrect. If automotive firms are able to quickly produce budget electric cars, perhaps the used car market may not receive such a significant boost, and Tesla and Toyota may not dominate as much as we've proposed.

The rumoured law changes will undoubtedly be interesting to see unfold, and could if successful inspire many other countries to follow suit in the future. The next 8 years are crucial to its success; if, by 2025, electric cars remain more expensive and inconvenient than their fossil fuelled counterparts, the proposal may be a failure.