The Hampton Economics Digest Edition 6

THE ECONOMICS DIGEST 9

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Contents: Editor’s Welcome …………..………………………………. 3 Manipulating Demand in the Digital Age .…..….... 4-5 The Failures of Equilibrium Economics ..…....…….. 6-7

The Global Sand Shortage ……........................... 8-9 Two Different Approaches to Sovereign Wealth ………………………………………………….... 10-11 John Law and Monetary Policy Reform ....…….. 12-15

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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

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Manipulating Demand in the Digital Age How are companies using our overdependence on screens to secretly influence our behaviour?

For a long time, companies have been exploiting human biases to manipulate consumers, generating and retaining demand through people’s inherent mental shortcuts, all in pursuit of maximising profit. 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 markets and consumers.

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.

When the price tag for an item such as a designer perfume reads ‘£20 - down from £40!’, the potential buyer’s mind is ‘anchored’ to the higher price, creating a sense that they are getting a better deal for the item. The second 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, despite the actual difference being negligible.

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. Another sales strategy used by retailers, particularly online, is displaying warnings of ‘limited stock’ or ‘limited time only’ to create urgency. This forces the brain into 4

what Daniel Kahneman, one of the founding fathers of behavioural economics, described as ‘thinking fast’ - emotional, impulsive decisions 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 make signing up incredibly attractive, using free trials, limited-time discounts, and bonuses for those who join now. When you try to cancel, it is far more difficult. Firstly, consumers have ‘default bias’ - if they have paid for a subscription for a long time, it becomes habitual, and it is easier to stick to a routine than to make a significant change. Secondly, these subscription providers impose many barriers to cancelling, such as cancellation fees and repeated “Are you sure?” messages, further incentivising their customers to remain set in their ways.

consumer welfare: information asymmetry. That is to say, the amount of data on behaviours and patterns that firms collect cannot be underestimated, yet consumers know so little about their own habits and biases. This creates a new form of 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 be manipulated.

Johnny Rofé

In general, demand becoming more malleable for firms has one particularly significant implication for

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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 enjoyed a clothing item on sale. Even though the consequences of fast fashion are evident, those big red 50% off sale tags 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 high street brands. However, this is not the full story. One of the reasons for the low prices that we enjoy is the low input 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 cost of production. To be able to remain 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 these chemicals daily as they often use 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 expensive and difficult to transition to a modern manufacturing economy.

Consequently, firms such as GAP and H&M are choosing to move production elsewhere. This leads to mass layoffs and unemployment within the country.

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 and unemployment among workers.

However, there are still solutions. The Indonesian government has recently increased the minimum wage by 5.36

7.3%. Although on the surface this may seem like a plausible solution, it may worsen the problem. This could mean that more large corporations choose to move production elsewhere to maintain profits. Due to Indonesia’s heavy reliance on the textile industry, this will significantly reduce total economic growth. Since Indonesia can no longer win the lowest cost race, a favourable solution might be a structural reform in the country, moving away from maximising volume to more valuable luxury clothing items.

A lower quantity would need to be produced and therefore could be made 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 would pollute Indonesian rivers for fear of scrutiny from consumers and tarnishing their brand image, saving our rivers and the people who use them.

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 clothing industry and our environment.

Aarush Jain

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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 question why is there such high demand for sand? Sand is essential for construction - concrete, glass, semiconductors, roads, an ultimate driver for urban, and economic growth.

Take China for example, a rapidly developing country which in the past 3 years has used more cement than the US did in the entire 20th century.

So, due to such popular demand, sand has become a commodity globally, making up 0.011% of world trade in 2024, only a small proportion.

Singapore currently is the leading importer for sand, as their urban areas rapidly grow, and USA leads for exports 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 hope to reduce climate change, 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 more valuable due to its many uses and hence is exported more. Some countries, on the other hand, have reduced their exports of sand due to the environmental inconveniences of mining it such as Indonesia. So, clearly there is an established market for sand, and key drivers for this market, however, has this excessive demand led to a black market?

The short answer is yes. In many countries, its high profitability due to organised crime, and corruption has led to illegal mining and trade. In fact, in India, there have been groups established as “Sand mafias”. Similarly to other scarce resources, such as oil, when demand is high, and there is a chance to profit, with little regulation, 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 8

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, this is just one of many problems in the sand market. With illegal mining, governments lose revenue, and control over their resources, which could cause potential recessions, though that is extreme. However, a more major problem is the environmental impacts.

The destruction of natural habitats, riverbeds, and wildlife species, as well as immense carbon emissions in the extraction and transportation of sand are terrifying and may not be worth it for 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 suffocating fish.

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

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 rivers is that it clogs and contaminates water supplies, as well as leaving bridges unsupported in their foundations. In Portugal in 2001, sand mining caused a bridge to collapse just as a bus was passing over it, killing 70 people. These are just a few of the many severe impacts of sand mining.

Fortunately, some solutions have been implemented to correct the problem of scarcity in the sand market. Many countries have shifted towards artificial sand, which involves crushing 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 buildings integrate this.

Robert Bercea

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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 100 that currently control their nations’ wealth and decide how best to invest and prepare for the future. Especially in an increasingly volatile global economy, SWFs are becoming an economic anchor through which countries can mitigate consequences from current events. The two SWFs this article will focus on are two of the biggest in the world: Norway’s Statens pensjonsfond (GPFG) and the Saudi Arabian Public Investment Fund (PIF).

Firstly, what is a SWF? Put simply, it is a place for governments to easily control where they put their money for an optimal return on investment, 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 commodity it exports).

The Norwegian GPFG is a state pension 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 policy has always been driven by a lowrisk 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 covers their budget deficit. Moreover, it acts as a financial reserve, allowing the 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 value in 2020 to cover the government’s increased costs. This fiscal discipline helps preserve the fund and ensures short-term economic gain is not prioritised over long-term growth.

The GPFG is the largest single owner in the world’s stock markets according to 10

Norges Bank’s 2025 report, owning roughly 1.5% of all shares in the world’s listed companies. Alongside GPFG’s $1.5 trillion in equities, it invests heavily in green energy, and as of 2025 it has invested $10 billion into primarily wind and solar to fund infrastructure projects. In 2025, the GPFG saw a return of 15.1%, the second highest in its history, driven by booming AI stocks and record-breaking increases in gold and silver prices.

The Saudi Arabian PIF controls roughly $950 billion as of March 2026 and is the seventh largest SWF globally. The PIF is less like a savings fund than the GPFG, 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 on oil creates uncertainty for the future 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 away from fossil fuels to greener energy practices like renewables. As a result of this, the PIF’s main objective is diversification of the Saudi Arabian economy away from fossil fuels.

investments are risky and are lossmaking. The most famous example 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 fiscal policy.

Overall, the fiscal policy of Norway’s GPFG represents stability and longterm wealth preservation. On the other hand, Saudi Arabia’s PIF represents an investment strategy aiming to overhaul an entire economy through diversification. It raises the key question: should governments prioritise conserving wealth or investing it into their economy?

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

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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 September 1715 after a 72-year reign, the France that he left behind plunged into a unique fiscal and institutional crisis. The Regency Council, designed to rein in the power of Philippe II of Orleans, was removed by Philippe’s annulment of Louis’ will in the French 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, that is me”. By placing authority in the hands of a larger group of individuals, 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 precarious position; decades of nearconstant warfare, including the War of Spanish Succession, coupled with a currency crisis in 1709, and exacerbated by rejection of Vauban’s proposed economic reforms (such as a proportional flat tax system without exemptions), had resulted in a gigantic (nearly 2 billion livre) national debt, or roughly fifteen times annual state revenue. This maelstrom of

financial and political desperation created the perfect conditions for brash financial experimentation.

Such desperation was evident in their choice of an unlikely monetary reformer in the Scottish gambler and exiled murderer John Law. Having fled 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 economics throughout his life, having joined the family banking business at age 14, and had in the first decade of 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” had not fallen upon deaf 12

ears; in 1716, Philippe endorsed what became to be known as ‘John Law’s System’, and by 1720 it had been fully established.

John Law’s system envisaged a completely new monetary system to what had come before. He proposed money not as a store of intrinsic value 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 directly linked to the value of bullion.

Law concluded that countries like France and Scotland, which were both relatively poor in terms of bullion, suffered from sluggish trade and a stagnant economy created by a lack of money in circulation. He suggested the replacement of metalbacked 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.

Law’s proposed system had further implications. Alongside the Fiatadjacent currency, Law suggested creation of a state bank with a monetary policy function, and creditbased economic growth. While the Bank of England, founded in 1694,

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 money supply as a stimulus.

The first stage was the Banque Generale, established in 1716, which issued notes which were redeemable 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 less pure metal to expand the money supply. The second stage was the Mississippi Company created in 1717 acquired by Law, and which held monopoly rights over French Louisiana, a largely unexplored territory thought to be rich in precious metal deposits. Law’s promotion, coupled with public excitement, facilitated sales of shares in the company using paper notes issued by the Banque Generale, expanding the cash reserves of the bank, enabling further acquisitions of trading monopolies which, by 1719, gave Law control of most of French overseas trade.

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Law acted rapidly between 1719-20, contributing to three defining actions that turned the Banque Generale into a truly unique and precarious national monetary system. Firstly, he nationalised his own bank, which became the Banque Royale, 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 investors to afford them. By late 1719, 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 of fortunes made overnight.

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 Law had supposedly freed his System from the constraints of bullion through rapid expansion of the money supply, in reality it was vulnerable to mass redemptions at the whim of noteholders.

In addition,

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 the panic that was growing day by day, forcing the Banque Royale to suspend payments entirely by the end of 1720.

Over the next few years, partial payments were made as recompense to ruined shareholders, but the damage had been done, leaving an enormous black hole within the French financial system.

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 nearperennially unsuccessful attempts to 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 14

contributed to the financial crisis which, 70 years later, sparked the French Revolution.

However, Law was simply a victim of his own success. His radical financial insights, that money supply affects economic activity, and that credit drives growth, occupy a fundamental 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 genuinely innovative, the failure of the execution of his system, reliant on perpetual confidence, highlighted the lesson that however elegant a theory is on paper, it rarely translates into practice without functioning institutional mechanisms to support it.

James Brocklebank

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