THE ECONOMICS DIGEST
From The Editor
Hello, and welcome to the sixth edition of The Hampton Economics Digest!
In this edition, we shine a light on some very interesting topics, from how companies are using our digital presence to influence our choices to the impacts of the global sand shortage, along with an in-depth look into the history of monetary policy starting all the way back in 1715!
This marks the second successful edition produced by the Lower Sixth team of writers, who have put a lot of time into exploring some incredibly fascinating topics. For this, I must thank the entire writing team, Mrs Mullan, and the Media Team at Hampton. With that done, all that’s left to say is enjoy!
Charlie Childs Founder and Managing Editor
Writers: Johnny Rofé (Editor), Aarush Jain, Robert Bercea, Sam Miller, and James Brocklebank
Manipulating Demand in the Digital Age
How are companies using our overdependence on screens to secretly influence our behaviour?
Foralongtime,companieshavebeen exploiting human biases to manipulate consumers, generating and retaining demand through people’s inherent mental shortcuts, allinpursuitofmaximisingprofit.This strategy comes from a relatively new strand of economics, heavily influenced by psychology: behavioural economics. In this article, I will explore how businesses have historically used behavioural economics, how the digital age makes expertise in this field incredibly lucrative for firms, and what implications this has for marketsandconsumers.
In the past, the way in which firms have used behavioural economics has been predominantly to do with how prices appear to consumers. One key tactic is called anchoring. Whenthepricetagforanitemsuchas adesignerperfumereads‘£20-down from£40!’,thepotentialbuyer’smind is ‘anchored’ to the higher price, creatingasensethatthey aregetting abetterdealfortheitem.Thesecond trick of this type is price framing -
where a subscription costing £365 per annum is advertised as ‘£1 per day’. Though these are equivalent, human bias causes consumers to tend towards the smaller number, much in the same way as a price of £9.99 is much more appealing than £10.00,despitetheactualdifference beingnegligible.
Now that consumers spend a significant proportion of their time online, businesses have a wealth of opportunities to manipulate buyers. One example is ‘streaks’ on mobile apps. These encourage users to log on daily using the principle of loss aversion, which states that losses hurt more than gains feel good, and hence consumers avoid perceived ‘losses’ such as breaking a streak. This tactic is predominantly used by apps with in-app adverts, such as Duolingo and Snapchat, as it generates lots of advertisement revenue.Anothersalesstrategyused by retailers, particularly online, is displaying warnings of‘limited stock’ or ‘limited time only’ to create urgency. This forces the brain into
what Daniel Kahneman, one of the founding fathers of behavioural economics, described as ‘thinking fast’-emotional,impulsivedecisions which often lead to irrational purchases.
However, the most prevalent exploitation of biases in the digital age is the shift in services towards subscription-based models, such as Spotify, Netflix, and Amazon Prime. But what do these have in common? The answer is that they are like smoking - very easy to pick up and very difficult to quit. Subscriptions makesigningupincrediblyattractive, using free trials, limited-time discounts, and bonuses for those whojoinnow.Whenyoutrytocancel, it is far more difficult. Firstly, consumershave‘defaultbias’-ifthey havepaidforasubscriptionforalong time, it becomes habitual, and it is easier to stick to a routine than to makeasignificantchange.Secondly, these subscription providers impose many barriers to cancelling, such as cancellation fees and repeated “Are you sure?” messages, further incentivising their customers to remainsetintheirways.
consumer welfare: information asymmetry.Thatistosay,theamount of data on behaviours and patterns that firms collect cannot be underestimated, yet consumers know so little about their own habits andbiases.Thiscreatesanewformof information asymmetry where firms know exactly how to steer each individual consumer, but only a very small proportion of consumers are aware of the ways in which they can bemanipulated.
In general, demand becoming more malleable for firms has one particularlysignificantimplicationfor
Johnny Rofé
The Failures of Equilibrium Economics
Supply and demand. This is the invisible hand that determines the price and quantity of a good or service. However, in Indonesia many firms are suspected of sewage dumping in the Citarum river, affecting millions of livelihoods How are supply and demand linked to this, and are they really to blame for these atrocities?
I’m sure we all have enjoyedaclothing item on sale. Even though the consequences of fast fashion are evident,thosebigred50%offsaletags are difficult to resist. But where do these clothes come from and what makes them so cheap? Indonesia exports over $13 billion USD worth of textiles every year and is the manufacturing hub of many popular highstreetbrands.However,thisisnot thefullstory.Oneofthereasonsforthe lowpricesthatweenjoyisthelowinput costs. Labour is relatively cheap in Indonesia with the minimum wage at around $120 a month. What is happening however is that clothes produced in countries such as China and Vietnam are even cheaper. What this results in is a flood of low-cost apparel, often priced below the actual costofproduction.Tobeabletoremain competitive, Indonesian firms are being forced to cut corners to reduce their costs. In the real world what this means is that firms are using cheaper but more harmful chemicals in the textile making process and not disposing of them properly. In the Citarum river, which flows through the capital city Jakarta, traces of mercury,
lead and arsenic have been found. Over 28 million people are exposed to thesechemicalsdailyastheyoftenuse the river for their daily needs. The higher price for making clothes in Indonesia has also led to caravan capitalism. Due to the aging infrastructure, high interest rates, (currently at 5.5% lending rate) it is expensiveanddifficulttotransitiontoa modern manufacturing economy. Consequently, firms such as GAP and H&M are choosingto move production elsewhere. This leads to mass layoffs andunemploymentwithinthecountry. Instead of transitioning to higherpaying jobs, displaced workers are ending up in the informal sector, reducing tax revenue. So we can conclude that it is the constant downward pressure on price that has caused firms to take shortcuts in production or leave the region entirely in order to meet demand at the equilibrium price. What this has caused is environmental degradation andunemploymentamongworkers.
However, there are still solutions. The Indonesian government has recently increased the minimum wage by 5.3-
7.3%.Althoughonthesurfacethismay seem like a plausible solution, it may worsen the problem. This could mean thatmorelargecorporationschooseto move production elsewhere to maintain profits. Due to Indonesia’s heavy reliance on the textile industry, this will significantly reduce total economicgrowth.SinceIndonesiacan no longer win the lowest cost race, a favourable solution might be a structural reform in the country, moving away from maximising volume tomorevaluableluxuryclothingitems. A lower quantity would need to be producedandthereforecouldbemade to a higher standard. More clothing brands would move away from mass production and towards a more sustainable and transparent practice. And most importantly, fewer firms wouldpolluteIndonesianriversforfear of scrutiny from consumers and tarnishingtheirbrandimage,savingour riversandthepeoplewhousethem.
Overall, the intersection of supply and demand, and the downward pressure on price, has caused a catastrophic problem for Indonesia. However, there is still a way the country can move forward to a sustainable future for the clothingindustryandourenvironment.
Aarush Jain
The Global Sand Shortage
Sand, the world’s second most-used natural resource, faces soaring demand, but the extraction methods currently available are unsustainable. The increasing pressure on supply is fuelling environmental damage and a growing illegal trade.
Sand is one of, if not the most overlooked natural resource in the word. After water, it is consumed the most. Every year, 50 billion tonnes of sand is consumed globally. That is enough to cover the entire United Kingdom with several centimetres of thickness each year. However, not all sand can be used. One cannot just simply go to the Sahara and collect sand to use. Why? It is too smooth. Sand is collected from waterbeds and coastlines.
This ultimately poses the questionwhy is there such high demand for sand?Sand is essential for construction - concrete, glass, semiconductors, roads, an ultimate driverforurban,andeconomicgrowth.
Take China for example, a rapidly developingcountry whichinthepast 3 years has used more cement than the USdidintheentire20thcentury.
So,duetosuchpopulardemand,sand has become a commodity globally, making up 0.011% of world trade in 2024, only a small proportion. Singapore currently is the leading importerforsand, astheirurbanareas rapidlygrow,andUSAleadsforexports due to its large deposits of pure silica sand, necessary for more complex goods - glass, electrical units, semiconductors, and solar panels
(which are also growing in demand in hopetoreduceclimatechange,further increasing demand for this sand). It is essential to note that construction (heavy, cheap) sand differs from industrial (silica) sand. The latter is far morevaluableduetoitsmanyusesand hence is exported more. Some countries, on the other hand, have reduced their exports of sand due to the environmental inconveniences of miningitsuchasIndonesia.So,clearly thereisanestablishedmarketforsand, and key drivers for this market, however, has this excessive demand ledtoablackmarket?
The short answer is yes. In many countries, its high profitability due to organised crime, and corruption has ledtoillegalminingandtrade.Infact,in India, there have been groups establishedas“Sandmafias”.Similarly to other scarce resources, such as oil, when demand is high, and there is a chancetoprofit,withlittleregulation,a black market emerges. This has resulted in extreme violence, such as the killing of a Mexican environmental activist, Indian villagers dying in gun battles, and a South African entrepreneur also shot dead. Furthermore, the restrictions on sand mining, due to environmental weariness, also led to companies and
criminal groups mining without permits. The sand mafias extract during the night, whilst working with corrupt governments, and violence, to succeed.
Although sand is a global necessity, thisisjustoneofmanyproblemsinthe sand market. With illegal mining, governmentsloserevenue,andcontrol over their resources, which could cause potential recessions, though thatisextreme.However,amoremajor problemistheenvironmentalimpacts. The destruction of natural habitats, riverbeds, and wildlife species, as well as immense carbon emissions in the extraction and transportation of sand areterrifyingandmaynotbeworthitfor the relatively low price of sand. Dredging a riverbed creates churnedup sediment, an external effect which clouds the water, destroying coral through blocked sunlight, and suffocatingfish.
extracting vast amounts of sand from the riverbeds, reducing flow of sediment. Also, the placement of five major dams further diminishes this flow to the delta. So, while natural erosion is occurring, replenishment is not.
Another huge environmental impact associated with sand extraction from riversisthatitclogsandcontaminates water supplies, as well as leaving bridges unsupported in their foundations. In Portugal in 2001, sand miningcausedabridgetocollapsejust as a bus was passing over it, killing 70 people. These are just a few of the manysevereimpactsofsandmining.
Let's look at Vietnam. River sand mining over there has contributed to the gradual disappearance of their Mekong Delta. The area is home to 20 million people and is a source of food for over half the country, whilst also providing rice to most of Southeast Asia. Reportedly, it is losing an area of land the size of one and a half football pitches every day due to climate change-induced sea level rise. However, researchers believe another reason for this is the robbing of delta sand. For many years, sediment was replenished by the river, however in recent years, miners have been
Fortunately,somesolutionshavebeen implementedtocorrecttheproblemof scarcity in the sand market. Many countries have shifted towards artificialsand,whichinvolvescrushing rock and construction waste, which can then be used for construction, such as in China and Japan. Germany and Switzerland are also prioritising recycled concrete in construction, like in Zurich, where all new public buildingsintegratethis.
Robert Bercea
Two Different Approaches to Sovereign Wealth
Saudi Arabia and Norway both have sovereign wealth funds (SWFs) funded primarily from oil revenue. However, they each have very different fiscal policies and use their SWFs for different economic purposes.
Sovereign Wealth Funds now manage trillions of dollars globally, with over 100thatcurrentlycontroltheirnations’ wealth and decide how best to invest andprepareforthefuture.Especiallyin an increasingly volatile global economy, SWFs are becoming an economic anchor through which countries can mitigate consequences fromcurrentevents.ThetwoSWFsthis article will focus on are two of the biggest in the world: Norway’s Statens pensjonsfond (GPFG) and the Saudi ArabianPublicInvestmentFund(PIF).
Firstly,whatisaSWF?Putsimply,itisa placeforgovernmentstoeasilycontrol where they put their money for an optimalreturnoninvestment, whether in the form of a social benefit to its people or extra revenue. They are typically funded by either budget surpluses or (more commonly) natural resource revenues. Their purpose is to fund development, save wealth for future generations, and stabilise economies in times of economic turmoil (especially if a country’s economy is reliant on the price of one commodityitexports).
TheNorwegianGPFGisastatepension fund created to manage the immense
wealth generated from the significant petroleum reserves extracted from the North Sea. The GPFG is currently the largest SWF in the world, managing an estimated $2.2 trillion as of March 2026. Managed by the Norwegian central bank (Norges Bank), its fiscal policyhasalwaysbeendrivenbyalowrisk investment strategy, aiming for long-term growth and wealth preservation for future generations. Due to the fiscal rule “Handlingsregelen”, only up to 3% of the fund’s value is typically allowed to be withdrawn and spent by the Norwegian government per year. This 3% makes up around 25% of the Norwegian government’s budget and coverstheirbudgetdeficit.Moreover,it actsasafinancialreserve,allowingthe government to spend in extraordinary circumstances, such as during the Covid-19 pandemic when it broke its 3% rule to liquidate 4.2% of the fund’s valuein2020tocoverthegovernment’s increased costs. This fiscal discipline helps preserve the fund and ensures short-term economic gain is not prioritisedoverlong-termgrowth.
TheGPFGisthelargestsingleownerin theworld’sstockmarketsaccordingto
Norges Bank’s 2025 report, owning roughly1.5%ofallsharesintheworld’s listed companies. Alongside GPFG’s $1.5 trillion in equities, it invests heavily in greenenergy, and as of 2025 ithasinvested$10billionintoprimarily wind and solar to fund infrastructure projects. In 2025, the GPFG saw a return of 15.1%, the second highest in itshistory,drivenbyboomingAIstocks and record-breaking increases in gold andsilverprices.
The Saudi Arabian PIF controls roughly $950billionasofMarch2026andisthe seventhlargestSWFglobally.ThePIFis lesslikeasavingsfundthantheGPFG, with its main aim being to diversify the Saudi Arabian economy away from oil. Currently, 42% of Saudi Arabia’s GDP and 90% of its exports are from the petroleum sector. This heavy reliance onoilcreatesuncertaintyforthefuture of the Saudi Arabian economy (emphasised by recent tensions surrounding the Strait of Hormuz), due to the volatility of the oil price and a global push to shift energy production awayfromfossilfuelstogreenerenergy practiceslikerenewables.Asaresultof this, the PIF’s main objective is diversification of the Saudi Arabian economyawayfromfossilfuels.
investments are risky and are lossmaking.Themostfamousexample of this is through its investment in sport, with LIV Golf and the 2034 FIFA World Cup being the most notable. These investments require billions of dollars in capital and bring in little revenue. For example, LIV has lost $2 billion since 2023, and as for the 2034 World Cup, Saudi Arabia is forecast to spend more than Qatar did on their 2022 World Cup ($220 billion). These risky investments summarise PIF's fiscalpolicy.
Overall, the fiscal policy of Norway’s GPFG represents stability and longtermwealthpreservation.Ontheother hand, Saudi Arabia’s PIF represents an investmentstrategyaimingtooverhaul an entire economy through diversification. It raises the key question: should governments prioritise conserving wealth or investingitintotheireconomy?
Sam Miller
Unlike the GPFG, the PIF focuses on domestic investment, with 80% of its investment occurring within Saudi Arabia. The main industries it focuses on are defence, technology, and entertainment. Often, these
John Law and Monetary Policy Reform
How a rogue gambler created both the macroeconomic blueprint of the modern economy, and an unprecedented fiscal crisis in doing so.
When Louis XIV, the self-styled ‘Sun King’ died of gangrene on the 1st of September1715aftera72-yearreign, theFrancethatheleftbehindplunged into a unique fiscal and institutional crisis.TheRegencyCouncil,designed to rein in the power of Philippe II of Orleans, was removed by Philippe’s annulmentofLouis’willintheFrench Parlement. Such reckless ambition, secured by bribes to Parlement, marked the end of the years of autocratic rule under the ‘Sun King’, who famously quipped “the state, thatisme”.Byplacingauthorityinthe handsofalargergroupofindividuals, namely the aristocracy of the Parlement as well as the Regent, the state was ripe for reform. Added to this, France’s finances were in a precariousposition;decadesofnearconstant warfare, including the War ofSpanishSuccession,coupledwith a currency crisis in 1709, and exacerbated by rejection of Vauban’s proposedeconomicreforms(suchas aproportionalflattaxsystemwithout exemptions), had resulted in a gigantic(nearly2billionlivre)national debt, or roughly fifteen times annual state revenue. This maelstrom of
financial and political desperation created the perfect conditions for brashfinancialexperimentation.
Suchdesperationwasevidentintheir choice of an unlikely monetary reformerin theScottish gamblerand exiledmurdererJohnLaw.Havingfled London after killing his opposite in a duel in 1694, Law had lived a playboy’s existence around Europe, frequenting the gambling tables of the landed elite. It was on one such occasion that he made the acquaintance of Philippe of Orleans, years before his regency, and impressed him with his eloquence and intellect. Law had studied economicsthroughouthislife,having joinedthefamilybankingbusinessat age14,andhadinthefirstdecadeof the 18th century pushed for the creation of a national bank of Scotland and an overhaul of the monetary system. Both these pursuits had failed, however, and by the time of Philippe’s regency, Law had been speculating extensively, both with cards and with financial instruments. But his suggestions in his 1705 essay “Money and Trade Considered” hadnotfallenupondeaf
ears;in1716,Philippeendorsedwhat became to be known as ‘John Law’s System’,andby1720ithadbeenfully established.
John Law’s system envisaged a completely new monetary system to what had come before. He proposed moneynotasastoreofintrinsicvalue itself, but as a facilitator of trade. Previously, the wealth of a state had dictated the value of gold and silver its central authority held, and therefore the money supply too was directlylinkedtothevalueofbullion.
Law concluded that countries like France and Scotland, which were both relatively poor in terms of bullion, suffered from sluggish trade andastagnanteconomycreatedbya lack of money in circulation. He suggestedthereplacementofmetalbacked notes with land-backed, and later share-backed, ones because land was a productive asset, which would expand the money supply without needing more metal. This would create a positive multiplier, as the increase in money in circulation created more trade, which would create more employment, leading to more tax revenue in self-financing growth.
had been created to issue notes and lend to the government, it operated within tightly defined limits, whereas Law’s proposition was for a far more ambitious, more interventionist national bank. On the other hand, Law advocated large-scale credit, rather than the both personal and local approach used in other countries, to deliberately expand the moneysupplyasastimulus.
Law’s proposed system had further implications. Alongside the Fiatadjacent currency, Law suggested creation of a state bank with a monetarypolicyfunction,andcreditbased economic growth. While the Bank of England, founded in 1694,
The first stage was the Banque Generale,establishedin1716,which issuednoteswhichwereredeemable in coin funded by tax payments, and which were guaranteed not to be debased, unlike royal coinage throughout Europe, and particularly France, which was frequently manipulated unsustainably by smelting down and recasting with lesspuremetaltoexpandthemoney supply. The second stage was the MississippiCompanycreatedin1717 acquired by Law, and which held monopoly rights over French Louisiana, a largely unexplored territorythoughttoberichinprecious metal deposits. Law’s promotion, coupled with public excitement, facilitated sales of shares in the companyusingpapernotesissuedby the Banque Generale, expanding the cash reserves of the bank, enabling further acquisitions of trading monopolieswhich,by1719,gaveLaw control of most of French overseas trade.
Law acted rapidly between 1719-20, contributingtothreedefiningactions thatturnedtheBanqueGeneraleinto a truly unique and precarious national monetary system. Firstly, he nationalised his own bank, which becametheBanqueRoyale,meaning the crown had a responsibility to guarantee its notes, whilst removing Law’s personal control over note issuance. Secondly, the Mississippi Company exchanged France’s sovereign debt in its entirety for shares of the company, seemingly solving the concerning national debt problem in one fell swoop. Finally, Law artificially inflated Mississippi share price, issuing new portions of shares at higher and higher prices, whilst printing money to allow investorstoaffordthem.Bylate1719, shares in the company had flown up twentyfold in less than a year, with speculative frenzy taking hold of people from across societal divides, and a bustle of activity around the informal stock exchange at Rue Quincampoix, propelled with stories offortunesmadeovernight.
disappointing revenues from French Louisiana helped to compound a growing sense of unease. By May 1720, the whole System was imploding, after several prominent investors had converted their shares to bullion, inciting widespread redemption requests. Law’s aggressive response, forcing down the value of gold to align with the share price, capping share prices, and finally restricting specie withdrawals, only served to increase thepanicthatwasgrowingdaybyday, forcingtheBanqueRoyaletosuspend paymentsentirelybytheendof1720. Over the next few years, partial paymentsweremadeasrecompense to ruined shareholders, but the damage had been done, leaving an enormous black hole within the Frenchfinancialsystem.
However, despite all his success, Law’s system faced a catastrophic structural weakness: the Banque Royale was still obliged to redeem notes in coin upon demand. Whilst LawhadsupposedlyfreedhisSystem from the constraints of bullion throughrapidexpansionofthemoney supply, in reality it was vulnerable to mass redemptions at the whim of noteholders. In addition,
The repercussions of Law’s System and its collapse were seismic and long-lasting. The national outrage that had ensued at the flight of Law from France in 1720 and the nearperenniallyunsuccessfulattemptsto fix the national finances fuelled a distrust in France of the financial system as a whole. Indeed, the word ‘banque’ was so hated that it was avoided by banking institutions well into the 19th century, and a national bank was only established in 1800, over a century after the Bank of England. Wider angst spawned among the masses toward institutions and the persistence of underdeveloped capital markets
contributed to the financial crisis which, 70 years later, sparked the FrenchRevolution.
However, Law was simply a victim of hisownsuccess.Hisradicalfinancial insights, that money supply affects economic activity, and that credit drivesgrowth,occupyafundamental cornerstone of modern macroeconomics, and he has been credited by Joseph Schumpeter as such. Law’s recognition of the constraints of commodity-based coinage would only be adopted during the 20th century, demonstrating his enormous foresight. While his theory was genuinelyinnovative,thefailureofthe execution of his system, reliant on perpetualconfidence,highlightedthe lesson that however elegant a theory is on paper, it rarely translates into practice without functioning institutional mechanisms to support it.
James Brocklebank