Word for Word : News, etc - Summer 2008

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Surviving the economic storm

Book Review - "The Economic Naturalist: Why Economics Explains Almost Everything"

Increase your vocabulary - See our Word of the Week: "Sough"

Celebrating 10 years

Surviving the economic storm

Credit crunch (n): ‘a state in which there is a short supply of cash to lend to businesses and consumers and interest rates are high’.

It’s the buzzword of the year, but what does it mean for your business?

It’s certainly harder to get a loan these days and forecasters are predicting a general economic slow-down. Coupled with the rise in fuel and energy costs and increasing inflation, the future is uncertain for many small businesses.

However, with careful planning, businesses should be able to survive a slump in the economy. It’s now even more important than ever to ensure that your business is running smoothly. A ‘health check’ (as offered by Business Link and others) will highlight any potential problems in company finances so that you can take preventative action and protect your business.

For businesses looking to reduce overheads, outsourcing could be the solution. Outsourcing is a valuable strategy for all kinds of businesses, from the SME to the blue-chip giant. In October 2007, WH Smith announced a rise in profits despite falling sales. One of the reasons for the increased profitability was their use of outsourcing – a strategy that contributed to a massive £10m saving.

Martyn Hart, Chairman of the National Outsourcing Association, said, "The credit crunch will create a situation whereby outsourcing will offer a solution to business needs.” Hart believes that more and more companies will consider outsourcing as a viable option for protecting and growing the bottom line.

By outsourcing services such as finance, HR, admin and IT, companies are able to tap in to higher levels of expertise than might be available in-house; what’s more, they can save costs and concentrate on their core business activities. It could be the key to withstanding the turbulent times ahead.

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Book review

Frank, Robert H. (2008) The Economic Naturalist: Why Economics Explains Almost Everything (paperback), Virgin Books, £7.99, ISBN 978-0753513385

Credit crunch, housing markets, inflation, recession… economics is often associated with complicated abstractions and financial disaster.

This book, written by one of Cornell University’s leading lights, takes a down-to-earth look at how economics shapes our world. Frank encourages you to think again about life’s everyday quirks and how the principles of economics can be applied to… well, “almost everything”.

Why is there a light in your fridge but not in your freezer? Why do 24-hour shops bother having locks on their doors? Why did Kamikaze pilots wear helmets?

According to Professor Frank, it’s all about economics. This fascinating and fun book is an excellent introduction to everyday economics and shows that the subject goes far beyond classrooms and international banks. It influences everything we do and see, from the cinema screen to the streets.

‘Economic naturalism’ applies basic economic concepts to explain everyday behaviour – a cost-benefit analysis to solve the problems around us. Frank shares his techniques to reveal why many of the most puzzling parts of ordinary life actually make perfect (economic) sense.

It may not help you make a fortune in hedge funds, but The Economic Naturalist answers the questions we really want to know. Frank’s snappy writing is sound but entertaining, making it easy to grasp the economic theory he introduces.

In the words of the author, “Having seen how basic economic principles help us answer interesting questions from everyday experience, you won't be able to resist posing and answering interesting new questions of your own.”

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