History of Internal Combustion Engine Literature review

History of Internal Combustion Engine - Literature review Example Resonance intake manifold The structure of the internal combustion engine requires a particular length of the manifold. The ability and the efficiency of an internal combustion engine will be determined by the size of the manifold. Short manifolds reduce the performance of the engine. Consequently, manufacturers have developed a system that allows for the length of the manifold to be controlled. Because a vacuum is created when the air is forced out by the piston, the fuel in form of vapour enters and creates energy. The valve that allows the fuel in closes and adds pressure to the fuel. When the fuel mixture is accelerated oscillations are developed depending on the length of the manifold. When the length of the manifold varies, it is also possible to vary the oscillations. Variability in length of the manifold usually affects the power, the speed of the operation and efficiency in fuel use. To maximize the efficiency of this system two intakes are refashioned each of which is regul ated by a valve connected to two manifolds. A short manifold usually functions when the engine is fully loaded while the long one operates when the engine is not fully loaded. ... This spin usually assists in distributing the fuel (in form of vapor) and makes the air and fuel vapor to uniformly mix. With this mixture the process of combustion is enhanced, completed and can even to an extent prevent the engine from knocking. When few revolutions per minute are recorded the velocity of the air is enhanced, while with more revolutions increases per minute, most paths are opened thereby increasing the load. A high volume of air therefore generally leads to increase in the power of the engine3. Vacuum boost theory The difference in pressure between the inlet manifold and the outside atmosphere is referred to as manifold vacuum. Therefore it acts as a measure of the amount of the airflow which is restricted in the engine. The amount of power the engine generates has a relationship with the amount of air that enters the internal combustion engine. For engines that use diesel in the internal combustion engine, greater dependence lies on the amount of fuel that is supp lied while those using gasoline will depend on the restrictions of the airflow. Manifold vacuum is usually in all the engines that use natural fuel as source of energy. The engine’s geometry and the speed of rotation affect the input flow in the engine, because geometry cannot be adjusted while the engine has commenced to run. The input flow in the intake manifold should not be restricted as this will interfere with the power of the engine and the possibilities of the engine breaking down. When the air from the atmosphere is allowed in the engine there is possibility that the pressure will automatic increase thereby creating the vacuum. The engine is now powered. We can conclude that engines running on natural fuel such as diesel generate

Outline the main features of the current legal regime for the Essay

Outline the main features of the current legal regime for the exploitation of the International Seabed - Essay Example The United Nations’ resolve was timely to intervene in terms of internationally acceptable legal framework, to assist states to achieve an equitable access to the resources bestowed to these uncertain areas. This study attempts to analyse the features of the current legal regime that touches on the international sea exploitation. It explores internationally set regulations and conventions attempting to introduce control and order over the resources. In the first section, origin of conventions and bodies associated with the control of international seabed exploitation is visited. Perhaps it is appropriate to lay the foundation to the current regulatory framework, by briefly mentioning some of the earliest conventions aimed at introducing order at the international seabed. In line with this, the discourse adopts a chronological order for the conventions, it terms of the date of formulation. The second section explores features of some of the regulations thereon. Current legal regime concerning international seabed could have obtained inspirations from a few international regulations formed several decades before. Perhaps a major development in the 17th century towards the same spirit was the Freedom of the Sea Concept which was generated in the context of orderliness in high seas.1 Later, it was common for such regulations such as the Copenhagen Convention of 1857, whose limited scope of intentions was to introduce order in the handling of access of the Baltic Sea. There was territorial uncertainty in the preceding year, compromising shipping routes, which was resolved by a financial undertaking for Sound and Belt dues handing it over to Denmark.2 The Hague Conference of 1930 was convened with an intention of defining regulations to govern international waters control.3 However, the initial ambition by the LON for creation of an international seabed

McDonald's Marketing Plan Essay Example | Topics and Well Written Essays - 1750 words

McDonald's Marketing Plan - Essay Example The researcher states that political factors are usually beyond the control of the organization. A business needs to prepare for the changes that might occur and take the necessary action required to remedy the situation. For example, some parts of the Middle East are unstable and McDonald being from Britain should be careful of what they say since it could hurt their business. Economic factors can affect the performance of the business. For example, the recent economic recession that led to the closure of multiple businesses and the laying off countless personnel. McDonald should put measures in place to shield itself from any future problems that might occur. Social factors can relate to the cultures, values, and beliefs of the society. It consists of the population’s demographics, which include size, gender, ethnicity, and education. It helps McDonald target their business services and products. McDonald Company embodies a broad spectrum of services, so it allows useful inf ormation to them. Developments in the technology world can affect business performance in both negative and positive ways. For example, the internet and consumer behaviors have changed towards the internet; this has negatively affected McDonald because there has been as a decrease in sales in their book section. It is because e-commerce has taken business away. However, the launch of online shopping has enabled McDonald`s to expand rapidly since all their products in one place, and it has become easy to navigate. It will be beneficial to McDonald`s because people in Europe love to shop, and a one-stop shop will be a crowd puller.

Organizational Behavior Essay Example | Topics and Well Written Essays - 1250 words - 2

Organizational Behavior - Essay Example Before these theories one important concept to be understood is from the Maslow's Hierarchy of needs and the Mclleland's need theory. These theories do set the steps for other theories, as organizations tend to fulfill their employee needs so as to prosper. Coming to the theories we have Douglas McGregor's Theory X and Theory Y. This has been a quite a study as it focuses on the employee behavior and how to handle such type of employees. Theory X states that employees are lazy and dislike work. It said that it's a human psychology to dislike work and put less effort. It demanded that people be coerced to work and some do not work until they are threatened for punishment or so. The theory also suggested that as they are de-motivated to work, employees require close supervision and direction to complete the task involved otherwise there would be an organizational loss. It also emphasized on the fact that most people want to delineate authority and avoid responsibilities therefore they prefer to be directed and moreover have no or less self control. People lying in this category mostly feel un-secure and have little ambition to go beyond. On the other hand Theory Y states that work is natural activity. People inducted in this theory are said to have self-control and ability to self-direct. They want to have authority and ambition to go beyond. They put in their best to achieve a task involved. The flow of rewards makes them more committed to the organizational objectives. As stated they seek responsibility and want to create something that can fascinate or at least that can be well regarded within the organizational framework. This theory has helped managers to bring out the most from their employees and have made it possible to design ways of improving productivity. Fredrick Wilson Taylor Moving forth we have the Scientific Management Theory by F.W. Taylor which also tends to focus on employees. This theory made it possible for the employers to make betted use of their resources and achieve the organizational objectives in a better fashion. There are 4 pointers in this theory which are the core. The core elements of this theory are: 1. The development of a discipline for each constituent of a man's work to substitute the old 'rule-of-thumb' techniques. 2. The scientific development, selection and training of workers instead of giving them choice of selecting their own task which they think they can best do. 3. There should be a good relationship among the employees and the management in order to carry out the designed procedures. 4. The distribution of work between workers and the management in about equal allocation, such that each group takes authority of what it can better do instead of relying more on workers only. Taylor's observation of the motivations of workers has had a deep influence throughout the century. According to Taylor we all have to make choices and thus are rational and this belief led him to formulate payment systems that very much related the kind of effort he wanted with the level of reward offered. As a fact, there was strong criticism of this premise that treats humans like machines and presupposes that workers

Fetal Heart Rate and Defects Essay Example for Free

Fetal Heart Rate and Defects Essay Electronic fetal heart monitoring is commonly used for tracking how well the baby is doing within the contracting uterus and for detecting signs of fetal distress. External fetal heart monitoring is performed by attaching external transducers to the mothers abdomen with elastic straps. The transducers use Doppler ultrasound to detect fetal heart motion, and the information is sent to the fetal heart monitor which calculates and records the fetal heart rate on a continuous strip of paper. More modern fetal heart monitors have incorporated microprocessors and mathematical procedures to improve the fetal heart rate signal and the accuracy of the recording. An echocardiography can be used before birth to accurately identify many heart defects. The mother can be treated with medications that may restore normal heart rhythm in the fetus if the test shows that a fetus’s heart is beating too fast or too slow (Emitting Waves, R.C., n.d.). The fetal heart starts as a tube which folds and fuses in a complex structure that results in a muscular pump with four chambers and four valves. It is not surprising that small errors in development can lead to a wide variety of structural abnormalities in the 4 chambers, the 4 heart valves, the veins and great arteries. During fetal monitoring, a nurse will evaluate the strip for continuity and adequacy for interpretation, identify the baseline fetal heart rate and presence of variability, determine whether there are accelerations or decelerations from the baseline, identify patterns of uterine contraction, and correlate accelerations and decelerations with the uterine contractions. This will allow the nurse to determine whether the fetal heart rate recording is reassuring, non-reassuring, or ominous (Childrens Heart Federation, n.d). Fetal Heart Rate and Defects The normal fetal heart rate is between 110 to 180 beats per minutes (BPM), but can vary. Fluctuations of the fetal heart rate (usually associated with fetal movement) during different periods of the day are common and often rise above 160, going as high as 180 to 190 and are considered normal. Listening to a normally beating heart using a fetal ultrasound Doppler as early as 8 weeks can offer reassurance and cut down on a lot of stress and help assure that the developing fetus is healthy. While miscarriage occurs in only about 15 percent of apparently normal pregnancies, it only occurs in about 1 percent of pregnancies where a normal heartbeat has been seen or heard (Medscape, n.d). Recent studies conclude that changes in pregnant womens heart rate and blood pressure due to chronic stress and anxiety can have an effect on the fetal heart rate. The study did not report any negative effects on fetal health but confirmed that emotional based changes in a womans cardiovascular activity c an have real-time effects† on a fetus. A previous study has shown that stress during pregnancy can cause an increase in the risk of low-birth weight and premature birth. More importantly, increased evidence suggests that pregnancy stress can actually affect the babys behavior and functioning later in life (NT: Detection Rate CHD, n.d.). The ability for expectant mothers to listen to the fetal heart rate with a fetal Doppler offers a safe method of early fetal bonding which was previously only available at prenatal appointments with a medical professional. With its approval for in home by the FDA expecting parents have increasingly been opting to rent or purchase fetal Dopplers to help relieve some of the stress associated with the unknowns of early and late pregnancy. Fetal Doppler rentals are currently available through many online retailers at very affordable rates. Fetal heart rate monitoring is the process of checking the condition of a baby during labor and delivery by monitoring his or her heart rate with special equipment. Electronic fetal heart rate monitoring (EFM) was first introduced at Yale University in 1958. Since then, continuous EFM has been widely used in the detection of fetal compromise and the assessment of the influence of the intrauterine environment on fetal welfare (Evans and Niswander, 2000). There are two methods of fetal heart monitoring in labor. External fetal monitoring is done through the skin and is not meant to be invasive. Sensitive electrodes (connected to monitors) are placed on your abdomen over conducting jelly. The electrodes can sense the fetal heart rate (FHR) and the presence and duration of uterine contractions. Usually, the results of this test are continuous and are printed out, or they appear on a computer screen. Internal fetal monitoring involves placing a electrode directly on the fetal scalp through the cervix. The health care provider may use this method of monitoring your baby if external monitoring is not working well, or the information is inconclusive. Both types of tests are performed to evaluate fetal heart rate and variability between beats, especially in relation to uterine contractions. The tests also indicate the frequency and strength of uterine contractions (Belmont, 1998). Fortunately, fetal heart monitoring tests can detect numerous abnormal situations or conditions during pregnancy, such as reduced blood flow to the developing baby (cord compression), block of electrical signals within the heart muscle, causing an altered heart beat (fetal heart block), incorrect positioning of the baby (fetal malposition), too little oxygen supply to the developing baby, suggest the presence of infection, too little oxygen exchange between the uterus and the placenta, fetal distress, placenta abruption, and severe anemia in the developing baby. Most common heart defects, such as holes between the chambers (atrial septal defect, ventricular septal defect) and even more complex conditions such as transposition of the great arteries and tetralogy of Fallot, can be successfully managed after birth (Belmont, 1998). Many of the aforementioned situations detected during a fetal heart monitoring could mean that the baby has a congenital heart defect. There are many types of congenital heart defects which is why it is so important that the fetal heart monitoring be done before and during labor. A fetal heart defect means that the baby will be born with a problem in the hearts structure. Learning of the childs congenital heart defect can help to understand his or her condition and what you can expect in the coming months and years. Some congenital heart defects are simple and dont need treatment. Other congenital heart defects in children are more complex and may require several surgeries performed over a period of several years. Heart-related complications can be temporary or may affect the child long-term (Emitting Waves, R.C, n.d.). One examples of a congenital heart defect is pulmonary atresia, which is when no pulmonary valve exists, so blood cant flow from the right ventricle into the pulmonary artery and on to the lungs. The right ventricle acts as a blind pouch that may stay small and not well developed. The tricuspid valve is often poorly developed, too. An opening in the atrial septum lets blood exit the right atrium, so venous (bluish) blood mixes with the oxygen-rich (red) blood in the left atrium. The left ventricle pumps this mixture of blood into the aorta and out to the body. Pulmonary atresia occurs in about one out of every 10,000 live births (Pulmonary Atresia, n.d.). Another type of congenital heart defect is congenital heart block, when detected at or before birth in a structurally normal heart, is strongly associated with autoantibodies reactive with certain proteins. In this defect, the hearts electrical signal doesnt pass from the hearts own natural pacemaker in the atrium to the lower chambers. When this occurs, an independent pacemaker in the lower chambers takes over. The ventricles can contract and pump blood, but at a slower rate than the atrial pacemaker. Complete heart block is most often caused in adults by heart disease or as a side effect of drug toxicity. Heart blocks can be present at birth (Belmont, 1998). Continuous lumbar epidural anesthesia is commonly used for analgesic treatment during labor and delivery; It is still a matter of controversy whether epidural anesthesia has direct or indirect side effects on the fetus. It has been reported that local anesthetics can cause changes in the fetal heart rate patterns in the sense of direct myocardial side effects (Evans and Niswander, 2000). It is apparent that there are marked cardiovascular changes that occur in the fetus with a congenital heart defect compared with the normal healthy fetus. Without the use of fetal heart monitoring tests, we would be unable to determine if the fetus has a congenital heart defect which could drastically delay treatment of the condition. Treatment varies widely with the type of disease, the effect that pregnancy has on the disease, and the effect that the disease has on pregnancy. If it is the fetus that has a problem, serial ultrasounds may be performed. Fetal heart rate monitoring may be necessary, or amniocentesis may be required. In addition, it may be essential to give the mother medications to act on the baby (Belmont, 1998). Summary A fetal heart defect is an abnormality in any part of the heart that is present in an unborn child. Approximately 35,000 infants are born with heart defects each year in the United States. An echocardiography can be used before birth to accurately identify many heart defects. The mother can be treated with medications that may restore normal heart rhythm in the fetus if the test shows that a fetus’s heart is beating too fast or too slow. In most cases, scientists do not know what makes a baby’s heart develop abnormally, but genetic and environmental factors appear to play roles.

Human Resource Management At Mars Confectionery

Human Resource Management At Mars Confectionery This assignment will investigate how human resource management (HRM) contributes to the achievement of organisational goals and objectives, particularly looking at HRM activities such as staffing, performance management and change management. A discussion of several HR planning and development models will be presented including the model of traditional manpower planning, the integrated human resources planning framework and the systematic model of learning and training. Finally, an analysis of how appraisal systems are used to monitor performance in organisations will be undertaken, making suggestions on the shortfalls of this method and potential improvements. Discussions in this assignment will be retaliated to current information about Mars incorporated Ltd (Mars). Mars is a privately-owned, global fast moving consumer goods organisation specialising in confectionery, drinks and pet care. HRM Information of Mars was largely obtained from in interview conducted with a line manager in HRM at Mars. Information in this assignment obtained from the interview has not been referenced. Other information presented about Mars which has been obtained from other sources such as their website and books has been reverenced at the end of the assignment. Task 1: Human Resources Management Human resource management activities at Mars Confectionery This section will firstly discuss the HRM activity of staffing which is conducted at Mars. Staffing is the process of acquiring, deploying, and retaining a workforce of sufficient quantity and quality to create positive impacts on the organisations effectiveness (Burkholder, Edwards and Sartain, 2004). Secondly, the HRM activity of performance management will be discussed. Performance management can be understood as the process of creating a work environment or setting in which people are enabled to perform to the best of their abilities (Bacal, 1999). Change management is the third main HRM activity conducted at Mars. Change management is a structured approach to transitioning individuals, teams, and organizations from a current state to a desired future state (Cameron and Green, 2004). Staffing Human resource management at Mars is primarily concerned with ensuring that the organisation is appropriately staffed with the right people, with the right skills, at the right time. At the employee level, staffing has the objective of finding an employee who fits into the culture and value system and who is motivated and empowered to work for the organisation. Secondly, at the organisational level, staffing aims to maximise critical knowledge, skills and abilities within the organisation which contribute to its overall effectiveness and competitive advantage (Judge and Ferris, 1992). At Mars, these objectives are achieved through several means. Initially, a clear forecast on future staffing needs are established. These are determined at Mars by the organisational strategy and the predicted turnover rates based upon averages from previous years. Contracts for different groups of employees are then devised and employment packages are designed to attract the required employee skill levels. Relevant line managers who are familiar with the skills required for the certain role will be required to draw up role specifications addressing the certain skills and abilities needed. In addition to this, employees seen as no longer fitting into the organisations culture and value system are dismissed by HRM. Before dismissals occur at Mars, HRM places underperforming employees on a Performance Improvement Plan (PIP) to help monitor their performance and provide them with mentoring. Performance Management A second activity of human resource management at Mars is to ensure that employees are highly motivated and perform well within their roles. The main objective of enhancing motivation and performance is to maximise the effort employees put into their roles and to focus attention on performance targets. In addition to this, enhancing performance within the workforce also helps to raise levels of commitment and engage employees in developing new ideas (Torrington, Hall and Taylor, 2005 p7). Enhanced employee performance is achieved by human resource management at Mars through employee training and development programmes which aim to increase employees capacity to adopt new technologies and methods. Training and development programmes allow employees to increase their career development through the organisation and reduce employee turnover through increased motivation and commitment. In addition to this, reward systems, such as promotion and bonuses, are also used at Mars to enhance performance through providing incentives and positive reinforcement. Change Management Another activity of human resource management at Mars is to make sure that organisational change interventions are successful and run as smoothly as possible. For example, Mars has recently implemented change programmes such as TQM and six sigma. These have required substantial changes to the organisations culture and work systems. It was HRs role to help with the planning of this implementation and to make sure that the necessary training and support was available to the workforce when implementation began. These objectives are achieved by HR at Mars through recruiting and developing people with the necessary leadership skills to help drive the change process. In addition to this, agents are also recruited by HR to encourage the acceptance of change by the workforce and construct reward systems to reinforce new behaviours. HR also takes a leading role in assessing the likely impact of change on employees as well as supporting them during the change programme. This is achieved through preparing information to help them cope with the process and developing a timeline for change. HR at Mars also has a critical role in assessing whether the change programme had been successful and monitoring whether it has produced the required return on investment. They achieve this objective through conducting employee survey to obtain feedback on employee perceptions regarding the change and how it was conducted. In summary, the three HRM activities of staffing, performance management and change management at Mars are essential for the smooth running and development of the Mars organisation. Theoretical models of human resource management This section will describe two influential models within HRM. Firstly, the Harvard model by Beer et al. (1984) is an analytical model which views employees as significant stakeholders within the organisation with their own needs and concerns (Torrington, Hall and Taylor, 2005 p34). Secondly, the Michigan or Matching model will be addressed. The Michigan model states that the control of HRM is the responsibility of senior management and sees employees as resources in the same way as any other business resource (Price, 2007 p39). The Harvard Model The model acknowledges that management has the greatest power within an organisation but suggests that for effective HRM, the needs of employees must be always be considered. For example, the model shows HRM policies to be influenced by two significant considerations: situational factors (workforce characteristics, management philosophy and labour market) and stakeholder interests (employee groups, community and unions). This shows that effective HRM should not be a reactive function but continually help monitor and adjust the organisations policies to meet the forever changing needs of the workforce and environment in which it operates. In addition to this, the model also acknowledges the need for HRM mechanisms to reconcile the inevitable tension between employee expectations and management objectives. For example, the implementation of rewards and structured work systems allow for the organisation to nurture the values of commitment, competence, congruence and cost effectiveness within the workforce. To achieve long term HRM objectives of individual wellbeing, organisational effectiveness and social well being, the Harvard model suggests that it is essential that all must be responsible for human resource and consider issues such as delegation, leadership, participation and team building. The Michigan Model Unlike the Harvard model, the Michigan model (Fombrun et al, 1984 p41) takes a top-down approach suggesting that the control of HRM is the responsibility of senior management and sees employees as resources in the same way as any other business resource (Price, 2007 p39). For example, the model highlights areas such as selection, appraisal, rewards and development but ignores the influence of employee needs and situational factors upon the organisation. Instead, the model views that employees have to be managed like equipment; obtained as cheaply as possible, used sparingly, and developed and exploited as much as possible (Price, 2007 p39). The Michigan model also shows that employees must be selected and trained to fit the strategic requirements of the organisation and show behavioural consistency with their ways of thinking and operating (Price, 2007 p41). For example, if there is an organisational strategy of innovation, employees will be expected to show long term creativity and skill. This is displayed by the great emphasis upon selection, performance and appraisal within the model. In contrast to the Harvard Model, the Michigan model shows HRM to be a reactive organisational function which under-emphasises the importance of social and external factors. For example, the model places emphasis on the importance of selection, performance, appraisal, rewards and training, but make no reference to employee needs and interests, and environmental factors such as employee groups, community and unions. This means that the model would be unable to factor in current concerns such as employee work-life balance. In summary, the Harvard and Michigan models both show two contrasting perspectives of effective HRM. Although they are both highly applicable models in their own right, it could be suggested that Harvard model is the most applicable to the HRM of today, taking into consideration current concerns of work-life balanced. Task 2: HR Planning and Development Three HR planning and development models This section will describe the two HR planning models of Traditional Manpower Planning and Integrated Human Resources Planning Model; and the HR development model of Systematic Learning and Training. Human Resource Planning Human resource planning is the process of managing when people enter, move through and leave business organisations in accordance with the overall objectives of the business. HRM needs to assess the future demand for staff and the availability of suitable staff to meet their requirements (RDI, 2008 p2.3 ff). 1. Model of Traditional Manpower Planning The model of traditional manpower planning is a more traditional human resources planning model emphasising the importance of obtaining the right number of the right employees in the right place at the right time (Torrington, Hall and Taylor, 2005 p51). The model suggests that demand for employees is strongly influenced by organisational strategies and objectives, the environment, and the way in which staff are managed and utilised (Torrington, Hall and Taylor, 2005 p51). Environment Organisational objectives and strategies Analysis of internal manpower supply Analyses of external manpower supply Project manpower demand Project manpower supply Manpower plans Reconcile Figure 3: Model of traditional manpower planning. Adapted from (Torrington, Hall and Taylor, 2005 p51). When applying the model of traditional manpower planning to Mars, it could be recommended that Mars begins by analysing the changing environment in which it operates. For example, the recent takeover of Cadburys by Kraft has meant that Mars strategy has become more defensive making sure that maintains its competitive advantage within the industry. Mars must begin to project manpower demand and supply to make sure it is able to recruit the right people with the right skills to facilitate its new defensive strategy. For example, one option for Mars is to target and recruit former Cadburys and Kraft managers to obtain important competitor information. Before it can fulfil this recruitment strategy, the model suggests that Mars must assess the availability of such knowledge within job the market. 2. Integrated Human Resources Planning Model Unlike the model of traditional manpower planning, the integrated human resources planning model brings together all aspects of HR planning and considers the effects of culture, systems and environment on employee demand (Torrington, Hall and Taylor, 2005 p52). The model identifies where we want to be based upon the organisations strategy; where we are now; and what we need to do to get there. Environmental Influences Where are we now? Translate vision Where do we want to be? Design and use plans to achieve transition Strategic Vision Figure 4: Integrated Human Resources Planning Framework. Adapted from (Torrington, Hall and Taylor, 2005 p52). When applying the integrated human resources planning model to Mars, Mars would firstly need to address where we are now; analysing the environment to determine what customers want and what competitors are doing. For example, from analysing the current confectionery market, Mars will determine that there is increasing competition from Cadburys due to its recent takeover by Kraft. Also, they would be able to determine from the analysis of customer requirements that there is a need for better customer service and lower prices. Based upon the model, Mars would then have to address where we want to be; translating environmental influences into strategic objectives which can be used to determine human resource goals. For example, for Mars to compete against Cadburys they must establish human resources goals to make sure that their hire talented managers who can bring new skills and capabilities to Mars. In addition to this, Mars should address what do we need to get there; addressing the resources and time-scales needed to fulfil the strategic objectives. Mars would need to decide on what type of skills and personalities they need to recruit, how many new employees they need to recruit and how they are going to advertise the positions. Human Resources Development HR development is a strategic approach used to invest in human capital. It draws on other HR processes including resourcing and performance assessment to identify actual and potential talent (RDI, 2008 p2.22). The systematic model of learning and training was developed to help organisations move away non-evaluated training, replacing it with a more orderly sequence of development. 1. Systematic Model of Learning and Training Environment Business Strategy People Development Strategy Identify development need Design development activity Carry out development Evaluate development Figure 5. A systematic model of learning and training. Adapted from demand (Torrington, Hall and Taylor, 2005 p391). According to the model, the changing environment and business strategy help to shape the type of skills and abilities required in the workforce. These developmental needs can be identified by both the individual and organisation through a problem centred approach (where a new strategy may highlight a shortage of a particular skill within the workforce) and developing an individuals competency profile to meet the job requirements. For example, the changing business strategy at Mars to improve internal computer systems has revealed a potential gap IT technical skills. When a gap in skill has been identified, the model suggests that the development required needs to be planned and developed. The planning and design of the learning will be influenced by HR development strategy, which may determine who is involved in the training and type of methods used. For example, HR at Mars has planned and developed a learning programme with trained IT trainers to visit the business and develop employee IT skills whilst at work, but not divert too much of their time away from other more important tasks. In summary, when an organisation such as Mars adapts to changing environments through with new strategic objectives, it often requires new skills to be brought in or developed within the company. These changes in workforce requirements can either be planned and remedied through recruitment, or development can take place to enhance and build upon existing employee skills and abilities. Planning and development models that are most effective in helping an organisation to meet is objectives are these which take a more holistic approach and are able to adapt to changing organisational requirements. Effectiveness in achieving organisational objectives An organisational objective at Mars is to gain and maintain competitive advantage through a highly skilled and motivated workforce. Although the model of traditional manpower planning is effective in allowing Mars to plan for and fulfil future workforce needs, the model does not take into consideration the need for Mars to plan for issues such as employee behaviour, personality and fit within the organisations culture. In contrast to this, the integrated human resources planning model is very effective in allowing Mars to achieve this strategy. Unlike the model of traditional manpower planning, the integrated human resource planning model is able to integrate the need of the organisation to obtain highly skilled employees with the need for them to have the right fit within the organisational culture. In addition to this, the model is able to adapt to the continuous changes to Mars strategy which is central to the manpower planning framework. The systematic model of learning and training is also effective in allowing Mars to achieve its organisational objective to gain and maintain competitive advantage through a highly skilled and motivated workforce. The model provides an integrated framework to allow Mars to plan learning programmes and to develop workforce skill around organisational strategies and environmental changes. Despite this, the model has the limitation of being too systematic and potentially unable to relate to the fast pace of continuous change evident at Mars (Sloman, 2001). In summary, it could be recommended that Mars adopts a combination of the integrated human resources planning model and the systematic model of learning and training. Through using a combination of these two models, Mars would be able to adequately plan for and hire appropriate staff and then develop skills to meet their strategy needs. Task 3: Performance How HR performance is monitored at Mars This section will discuss how appraisal systems are used at Mars to monitor performance. Performance appraisal systems are a formalised process to review performance at work over a given period of time (Grote, 1996). Mars uses a method whereby role objectives or targets are established by the employee and line manager throughout the year and are later reviewed at the next appraisal. Assessments are made to measure the extent to which these objectives have been met throughout the year. Mars believes that performance expectations need to be understood and involve contribution from employees to allow for a greater degree of input and commitment. The objectives set by employees at Mars are closely monitored by the line manager to make sure that they appropriately stretch the individual and offer personal development as well as meeting the needs of the role. The objectives set by the employee and line manager are prioritised according to importance and how urgently they need to be addressed. Prioritising objectives in this manor allows the employees to manage their time more effectively through addressing the most important objectives first. In addition to this, Mars also uses the SMART system for describing individual targets and objectives. Before a target can be set by the employee, the line manager must make sure that the target is Specific, Measurable, Appropriate, Relevant and Timed. Ensuring that the target meets these criteria means that the objectives are meaningful and reliably assessed. Regular brief meetings are set between employee and manager, as objectives are met, to discuss progress and decide on whether new objectives need to be added or whether some objectives need to be removed. Problem areas are highlighted and discussed, and ongoing coaching is given by managers to help guide employees by giving constructive feedback. 360 degree appraisals are used at Mars to allow for a more fair and stringent method of performance assessment. Performance is monitored and assessed by a variety of people in contact with the individual, including, line managers, peers, clients, suppliers. Obtaining appraisals from a variety of sources allows for a fuller picture to be built up of the performance and capabilities of the individual in many different areas of their work. The outcome of appraisal systems at Mars is directly linked to the salary and promotions. For example, if employees are rated during their appraisal as exceeds expectations, they will receive a 4% pay raise the following year. Employees rated as below expectations can be placed on a Performance Improvement Programme which means that their performance is closely monitored throughout the year and they are provided with mentoring to improve problem areas. Although it appears that Mars has a very stringent approach to performance appraisals, it is important to understand how Mars uses this information after it has been obtained and whether line managers have received the correct training to make sure they are collecting information fairly. Effectiveness of the appraisal system at Mars and potential improvements. The appraisal system at Mars is very effective in obtaining reliable and useful information regarding employee performance. One way in which Mars maintains the effectiveness of its appraisal system is through making sure that line managers are properly trained to conduct appraisals. Managers are required to attend a yearly training session supported by human resources where they informed about the most effective ways of monitoring process and supporting their employees through development. Training is also provided on how to record appraisal information efficiently and how to conduct 360 degree appraisals. Despite the stringent approach to performance appraisals at Mars, appraisal have been criticised for being too subjective (Torrington, Hall and Taylor, 2005). Sometimes appraisals can be unreliable through prejudice when the appraisers judgement is distorted because they dont like the appraisee. Also appraisals can be unreliable when the appraisers have insufficient knowledge of the appraisee. This is particularly the case when appraisers carry out appraisals due to their position in the company hierarchy rather than their knowledge of the appraisee. In addition to this, appraisals can cause a lot of anxiety and stress for all involved. Research about appraising performance has found that the appraisal itself was often accompanied by long periods of sickness absence due to stress (Grint, 1993). This is a potential problem at Mars because appraisals are directly linked to employee pay and promotion which may create a lot of stress for individual employee. Effectiveness of appraisals at Mars can be improved further making sure that all involved in the 360 degree appraisal understand what the system is for and the importance of accuracy. Research suggests that questions will be answered more accurately when participants understand the true purpose of the appraisal (Grint, 1993). In addition to this, plenty of feedback should be given to those involved in appraisals as research also suggests that feedback allows for the system to be better accepted and reduces anxiety (Grint, 1993). In summary, Mars has a very stringent approach to performance appraisals. They believe that it is important to obtain a full picture of the individual, from many different sources and allow the individual to play an active role in shaping their own objective and target setting. Despite this, improvements can be made to make sure that stress is kept to a minimum and proper training is provided to make sure that appraisals are not biased in anyway. Assignment Conclusion To be successful in a fast changing global economy, organisations must invest more time and resources into the acquisition and development of high calibre employees. HRM has a vital role to play in this strategy through performance management, recruitment and change management. In the example of Mars, HRM is continually facilitating an environment where employees can improve their skills and competencies through professional development programmes and performance appraisal. Although Mars has well developed HRM policies, to remain competitive, they must continue to invest time and resources into HRM to continue to obtain the right employees, with the right skills at the right time.

Analysis of the Housing Market in the UK

Analysis of the Housing Market in the UK Introduction For most people in the UK, as in other countries, the purchase of a house is the single largest expenditure they ever make. In contrast with other purchases, a house is not only something that provides highly desirable services – convenient and independent housing – but it is also the single largest element of household wealth. For homeowners, this asset motive for buying a house is becoming increasingly important. As a store of value, houses are increasingly becoming both a critical component in households’ long term financial planning as well as a basis for raising consumption. Just like possessing a portfolio of valuable stocks and bonds, owning a house whose market price amounts to greater wealth. It follows, then, that a change in the market value of a house will change the owner’s wealth, and, consequently, the owner’s consumption expenditure. While the housing market in the U.K. has experienced several dramatic phases in the past three decades[1], its behavior in the last decade or so is not only without precedence but it is also a reflection of a fundamental transformation in the economy’s financial system. Whether being labeled as the product of ‘irrational exuberance’[2] or being described as a ‘bubble’, housing market developments have spawned a wide body of thinking that is increasingly taking on a nervous tone – especially among economists. A quick survey of the macroeconomic literature related to the housing market reveals that the period from the late 1990’s to around 2004 saw a confluence of several phenomena that seem to be related via a series of strong theoretical linkages. Key among these are historically high levels of home-ownership and housing wealth, an extreme housing-price boom, a generously liberal credit regime, unanticipated levels of borrowing, the lowest interest rates in generations, massive consumption expenditures/dangerously low savings rates, general economic prosperity, and, a rising trend in bankruptcies and house possessions. The objective of this project is to highlight the linkage between housing wealth and consumption expenditures with special focus on the events of the last decade. Given the nature of macroeconomic linkages, it turns out that in order to study this relationship in the context of UK, it is necessary to tell an economic tale that incorporates all of the phenomena mentioned above. While there are rather straightforward theoretical reasons as to how and why the national housing wealth affects aggregate consumption, the historical and institutional realities of the financial industry, the changing consumer behavior with respect to credit, the evolving demography etc. have played an important role in shaping this relationship in the UK. Over two-thirds of UK households owned their home and it is typcially their biggest investment they make. At the aggregate level, housing wealth is now greater than the size of their financial holdings[3]) and it is distributed in a considerably more equitable manner across socioeconomic and demographic segments as compared to the latter. Such investments bring reasonable returns over the long term, and in the last five years house price appreciation has more than doubled the value of the stock. It follows, then, that changes in housing wealth have the potential, in theory, to have sizeable effects on consumption, GDP, unemployment etc. The theoretical mechanism by which changes in housing wealth are transmitted into consumer demand, called the ‘wealth effect’ (discussed in detail later in the paper), is of critical importance to the economy because its impulses also affect an array of other macroeconomic variables and processes. Clearly, the ability to draw on this major store of purchasing power has serious implications for the financial health and prosperity of homeowners and, hence, the economy. With respect to access to the ‘frozen’ housing equity, the UK experience has been uniquely successful as compared to those of almost all other OECD countries. A series of policy moves to deregulate and ‘liberalize’ lending practices resulted in democratizing the credit market such that loan products once provided to the privileged, became common-place. Households that had faced credit barriers could now affordably borrow large amounts thus unleashing the power of the wealth effect. Therefore, the ways in which UK households obtain and dispose off the equity is of particular interest to this study.[4] This paper is organized as follows: the next section lays out the key issues involved in this study; the third section discusses the theoretical and analytical matters concerning the wealth effect in the context of the recent UK housing boom; the fourth section surveys the empirical research in this area; the fifth section presents the empirical work done for the study, including a description of the findings from regression analysis using Microfit; and the last section offers some conclusions from the work. (There are graphs and figures associated with the text and they are appended at the end.) A Review of the Peculiar Issues and Macroeconomics of the UK Housing Market Nature of the boom With focus on the 1995-2004 period, this section lays out the key issues involved in understanding of the structure and strength of the relationship between housing wealth and consumption. At the outset it is necessary to have an overview of developments in UK’s housing market during the pertinent period to highlight the generation of housing wealth, the manner in which it is accessed in the form of equity, and channels of disbursement of the equity. The UK housing market became truly energized in the mid-to-late 1990’s, beginning with a property boom in the London area and then gradually spreading to virtually every region. Homeownership levels reached historic levels and so did the share of ‘buy-to-let’ residential investments in the country’s portfolio. Using data published by Halifax-Bank of Scotland, Graph 1 provides the salient market metrics: the price boom accelerated to push the price of the typical house from around  £61,000 in 1995 to over  £161,000 by 2004 – an increase of over 160%; not only was the speed and tenacity of housing prices unprecedented, the annualized percentage growth rate seem to rise with the level of prices. Far from being a localized phenomenon, this housing boom covered the entire UK, as Graph 2 demonstrates. While, the origin of the boom was in Greater London and the Southeast in the mid 1990’s, it quickly enveloped East Anglia and the Southwest. However, by 2001 the boom entered its most vigorous phase as it spread to the peripheral regions with prices almost doubling in a five-year period. Since most of the home purchases are financed through mortgages, the two variables that shape housing demand decisions are the interest rate and property prices. As it turned out, with historically low nominal lending rates (see discussion later), the home prices was the chief determinant behind purchases. The feeding frenzy that was the housing market pumped prices to such a level that placed typical accommodations out of reach of most would-be buyers. The Affordability Index, calculated as the ratio of housing prices to household disposable income, rose from 3.09 in 1995 to 5.45 in 2004. It is useful to note that higher aggregate housing wealth can be a product of a rise in housing prices and/or a growth in the stock of housing. As is displayed in Graph 3, the early 1980’s saw housing wealth grow due to a steady rise in prices while in the late 1980’s and early 1990’s we see stability in it despite declining prices. There was rising home ownership during all three intervals; in the early 1980’s it was engendered by the privatization of some public housing [5, p. 12] while the late 1980’s and early 1990’s it was due to stimulated demand spurred by declining prices and interest rates. With housing prices rising at around 20% per annum, vast slices of society saw the value of their homes reach unseen levels as the market injected equity. This store of equity was virtually a battery filled with purchasing power that was steadily getting charged by the market and that could be tapped into, if needed, to finance purchases. Halifax (2005) reports on it website that at the end of 2005, UK’s housing wealth reached a historic peak at  £3,408 billion which amounts to triple the figure in 1995 with the last five years seeing a 60% increase. As Graph 3 illustrates, since the mid-1990’s the unprecedented spurt in housing wealth can be attributed mainly to rising prices. Clearly, an index of housing prices is an excellent proxy for housing wealth. [5] What generated the price boom? As compared to the preceding 15 years, the last decade saw the housing market subjected to a variety of macroeconomic and financial forces. Following Her Majesty’s Treasury (2003) and Farlow (2004), one can identify demand- and supply-side factors responsible for shaping the current housing market. On the demand side, the key market forces were: According to Her Majesty’s Treasury (2003) the early 1980’s saw a sustained campaign of liberalization of the credit market that led to increased competition among banks and non-traditional lenders, rampant development of new credit products, and enhanced capacity of banks to create liquidity; all of which made obtaining housing loans easier and a more egalitarian process by lowering transaction costs. [6] Low and declining interest rates pushed down the cost of mortgage credit thereby stimulating housing demand; Macroeconomic prosperity with higher disposable income and lowered unemployment rates allowed for more purchasing power; Expectations of continuous expansion and future employment created an optimism among households Despite an ageing population, members of typical home-buying age-cohort (especially baby-boomers) saw their households grow, thus creating a greater demand for family housing; And lastly, the explosion in ‘buy-to-let’ purchases led to a massive speculative demand fueled by expectations of sustained housing price increases. On the supply side, the major market forces according to Farlow (2004) and Her Majesty’s Treasury (2003)were: a low price-elasticity of supply due to a combination of policy regulations, regional scarcity of land, and lags in obtaining licence/local approval; Scarcity of existing housing available for purchase i.e. low vacancy rate; Rising costs of construction, especially due to labour shortage and rising prices of materials. When a strong level of demand and a limited and inelastic housing supply are combined, one can see why prices have risen so quickly. Housing wealth vs. Financial Wealth To understand the rising significance of the recently acquired housing wealth, it is interesting to compare it with the ownership of financial assets in UK. Housing remains UK’s greatest asset with the total of shares, bonds, and cash amounting to  £1.6 trillion. In the past, financial assets pensions and holdings of shares, bonds, and bank accounts accounted for bulk of the nation’s wealth. However, recent history has created housing as the asset that is held more widely and equitably – across geographic regions, age cohorts, and income groups – than financial wealth. Pensions were clearly concentrated among the older age groups and the bulk of other financial assets were held largely by a small opulent minority. Data provided by National Statistics (www.statistics.gov.uk) and Her Majesty’s Treasury (2004) describe UK’s home ownership as widespread across all income and age categories with older segments having a larger rate. Whereas shares and bonds are owned largely by people in higher income groups – for obvious reasons – the housing boom has proved to be a moderating or equalizing force as all homeowners have benefited from rising property values.[7] The English Longitudinal Study of Ageing (2002) provides some supporting evidence in this respect. The study finds that because of the relatively even distribution of recent gains, housing wealth has become more important than non-pension financial wealth, especially in the 50+ age group. The following table shows that not only is the typical size of housing wealth ownership greater than net financial wealth (non-pension), but that it is far less concentrated across society as reflected by the lower inter-quartile ratio and lower Gini coefficient. Table 1. Net Housing Wealth approx. Net Financial Wealth – approx. Mean  £73,000  £44,000 Median  £52,000  £12,000 Inter-quartile ratio 5.14 69.3 Gini Coefficient 0.575 0.761 Source: English Longitudinal Study of Ageing (2002), IFS. The data shown in Graph 4 reveals though financial wealth had dominated all through the 1990’s, the rapid growth of housing wealth since the mid 1990’s coupled with the stock market bust has again placed the two neck and neck. Even with parity in value, the prominence that housing wealth commands in the national balance sheet is the consequence of its relatively equitable distribution and the fact that in spite of recent volatility in housing prices, it is historically far more reliable as an investment than the market value of corporate shares – the dominant component of financial assets. With growth in house prices outstripping the growth in mortgage debt, mortgage equity has increased from  £700 billion in 1995 to  £2.4 trillion at the end of 2005 – a 250% increase. In real terms, the last five years have seen the value of housing stock rise by over 60%. Thanks to housing values rising faster than mortgage debt in each of the last ten years, UK homeowners now have a greater financial buffer for leaner times. Ten years ago, the typical home was worth 2.8 times as much as the typical mortgage; at the end of 2005, this ratio had increased to 3.5, underlining the fact that the country has more equity than a decade ago. Tapping into housing wealth A survey of related literature from Bridges et al (2004), Davey (2001), Farlow (2004), Nickell (2004), and Salt and Macdonald (2004) reveals a variety of ways in households can access the equity stored in the residences. The manner in which a particular household harvests equity depends on the circumstances under which the action is taken. Table 2 below has categorized the possible scenarios. The table explains that households that continue to occupy their home can draw equity by re-mortgaging, i.e. borrow by treating their property as collateral. Households who move could access equity either by over-mortgaging the new home, or by buying a cheaper house in the new location, or by selling their house move to a rental unit (thereby liquidating their asset and obtaining the entire stock of equity). The last possibility covers cases where the owner id deceased or leaves the country, leading to the final sale of the house and the release of 100% of the equity. Table 2. Category of Homeowners Method of Extracting Equity Houseowners retaining possession Re-mortgaging: by taking out additional mortgage(s), borrowers could access equity up to a maximum percentage of value Houseowners that move Down-grading: these households move to a cheaper home, thereby harvesting the equity that equals the difference between the value of sale and the portion of mortgage that was owed Over-mortgaging: these households move to a new residence but manage to obtain a mortgage loan that exceeds the value of the new purchase. This typically occurs in regional markets where there is strong expectations of continuous property-value appreciation Final sale with return to rental: some households sell their houses in order to move to a rental property ostensibly due to either lack of affordability (those with diminished earnings) or convenience (mostly the elderly and the infirm) Households in which the owner(s) are deceased Final sale: when the owners dies, the property is sold with the receipts being used for purposes other than purchase of a house Having harvested the equity, how a given household’s chooses to allocate it across possible uses depends on a range of socio-economic and demographic factors like income level, family size, amount and composition of wealth, age(s) of the members, their geographical location, and even their ethnicity. The following section provides a detailed discussion of the conversion of equity into a specific one use – consumption. Housing wealth and the consumption function: Theory, Analysis, and UK Evidence In this section we begin with outlining the macroeconomic theory behind the consumption function with special reference to the wealth effect. The aim is to both explain the causal relationships behind the various ways in changes in the housing market can impact consumption as well as to identify the factors and circumstances under which the wealth effect might be weakened. The issues in this discussion are with explicit reference to the specific case of the UK. The original Keynesian consumption function was presented as: C = a + bYd(1) Where C denotes real consumption, ‘a’ is the autonomous consumption expenditures, ‘b’ is the parameter symbolizing the marginal propensity to consume (hereafter, mpc) that was postulated as being a constant fraction, and Yd the real disposable income. Shifts in the consumption function are considered as being caused by ‘shocks’ or changes in variables other than Yd. Given the historical period when Keynes first conceived this relationship, it is not surprising that income was the chief driver of consumer spending. Presumably, because wealth was highly concentrated within the aristocracy and credit was a privilege for the few, Keynes decided to lump all non-income influences on consumption into the autonomous term. Over time, with growing sophistication of macroeconomic theory and of market-based economies in general, the consumption function came to be recognized as the following general formulation: C = Æ’(Yd, Real Interest Rate, Price Level, Wealth, Expectations)(2) This explicitly recognized the influence of, among other variables, wealth on consumption decisions, i.e. the wealth effect. However, the formulation stuck with the original assumption of the mpc being constant. That, after all, was acceptable because Keynes’s thinking was anchored in short run considerations and the assumption of unchanging consumers’ sensitivity to income changes was consistent with the model. However, empirical testing of the formulation revealed that not only did the mpc vary with the length of time over which the estimation was conducted (it increased with time), but that its value tended to approach one. This certainly cast a cloud over the consumption function’s relevance and reliability in terms of explaining behaviour.[8] With new thinking about consumption expenditures and about the time-horizon over which a household’s economic decisions were made, two new theories emerged. The Life Cycle Hypothesis (LCH)[9] and the Permanent Income Hypothesis (PIH)[10] both began from the fundamentally un-Keynesian assumption that households make decisions based on their assessment of not only the present but also the anticipated or likely future circumstances. In addition, both also held that rational spending and hence saving decisions necessarily involved long term planning – plausibly for rainy days, growth in family size, and old age. According to Miller (1996) and Gordon (2003), the LCH assumes that permanent incomes are determined over the entire lifetime of the consumer, with allowance for a transitory element that depends on the consumer’s professional status. While the lifetime-oriented income could rise or fall in response to changes in productivity and unexpected events, consumption is smoothed and maintained at an even keel with dissaving (or borrowing) making up any shortfall in spending power. Similarly, in boom periods households save and accumulate purchasing power as wealth for future use. The long term level of income is assumed to follow a smooth path. Clearly, wealth plays a critical part in this model as the household accumulates savings in periods when smoothed consumption is below income. Similarly, as needed, wealth is accessed or made liquid for spending when planned consumption exceeds earnings.[11] The theoretical significance of the LCH – which forms the basis of much of the empirical research reviewed – is easy to see because the way it explicitly incorporates the wealth effect into the household’s lifetime decision horizon with respect consumption, it makes it convenient to model housing wealth. Like the stylized household in the model that begins income-earning phase of her life with modest income and some debt (incurred because of current consumption expenditures exceeding lifetime income), the typical new homeowner is relatively young with a mortgage debt that is several times her annual income and little in terms of savings. Over time, in the absence of tumultuous booms, population and income growth in the economy lead to a steady rise in property values and mortgage equity accumulates. With growing needs for durables, the homeowner then has the possibility of ‘cashing in’ some of the stored housing wealth when current income and savings prove inadequate, much in the same way as the theoretical consumer enters a life-phase during which dissaving takes place. The key idea here is that just like the accumulated housing equity is part of purchasing power for the lifetime, the consumption decision also cannot be inconsistent with a long term budgetary process. This model also suggests that there are periods (or life phases) in the household’s lifetime when wealth is accumulated and when it is used up in the form of consumption. This clearly defines when and under what circumstances mortgage equity is spent. For a young family that continues to occupy a house, the prime motivation is to accumulate equity and harvest it for emergencies or for planned increases in spending that are in balance with expected lifetime earnings which presumably are adjusted for the debt service associated with the additional mortgage. This scenario is consistent with, say, a home improvement project that allows for a larger or growing family or with purchase of durables for a similar purpose. For older homeowners who are approaching retirement or are actually retired, withdrawing equity is consistent with their position in the ‘life-cycle’. Since the income stream is either expected to end or has ended, spending decisions warrant the use of sa vings and/or mortgage equity withdrawals (MEW). Critical to this model is how it treats the rapidly accumulated wealth gains due to a market-driven housing price boom like UK just experienced. Analyzing the housing wealth effect in the context of the LCH, Bridges et al (2004) liken the rise in housing wealth to raising the household’s lifetime budget constraint. Assuming easy access to credit, they identify two pertinent theoretical relationships: one between housing price increases and the lifetime incomes of the wealthier households and the other between housing wealth and the newly acquired debt obligations of the re-mortgaging households. In theory, then, higher housing prices generate wealth effects depending on whether or not the price change is interpreted as permanent or temporary. If households perceive the gains to be permanent or unlikely to be reversed by a sudden housing bust (like what the UK witnessed in the 1980’s and early 1990’s), then it amounts a rise in lifetime income and higher consumpti on expenditures induced by it are ‘allowed.’ On the other hand if the price (and wealth) increases are due to random market activity and will most likely be followed by a decline, then the realized buildup of mortgage equity ought to be regarded as a temporary development and no serious consumption outlays need be planned to spend it. LCH holds that households that are pleasantly surprised by equity gains and choose to borrow against it for extravagance or pleasure spending are fully aware of the future debt-service implications and have made the necessary budgetary calculations that reveal that these actions related to the wealth-effect are compatible with their lifetime income. Curiously, O’Sullivan and Hogan (2003) report that Ireland also experienced a housing boom (though not as extreme as the one in UK), but that there were no signs of a wealth effect. This was presumably because Irish consumers did not put much faith in the housing market’s longevit y and construing the recent price gains as transitory, let the accumulated equity stay ‘frozen.’ However, it is possible that there were indeed impulses related to a housing wealth effect but simultaneously counteracting forces offset it, resulting in generally unchanged aggregate consumption.[12] The above discussion opens up three related and important issues: (i) the process by which accumulated housing wealth translates into consumption expenditure, i.e. the anatomy of the wealth effect in the housing context, (ii) the implications of multiple possible uses of MEW for the strength of the wealth effect, and (iii) other macroeconomic factors that can offset the wealth effect or perhaps prevent it from materializing. Anatomy of the Housing Wealth Effect There are two channels through which homeowners are able to raise their consumption via the wealth effect. As explained above, one way for homeowners to convert their housing wealth is by harvesting mortgage equity MEW. Table 2 outlined the variety of ways in which households obtain equity. Benito and Power (2004), Bridges et al (2004), and Davey (2001) provide insight into how MEW has become a major source of consumer financing in the UK. Graph 5 clearly shows the close relationship between housing prices and MEW[13]. Throughout the last three decades, except for the 2003-2004 interval, UK’s homeowners have reacted to the housing market’s wealth rewards. As Davey (2001) explains, MEW was relatively unimportant in the 1970’s but rose sharply in the following decade. In the early 1980’s despite a recession, MEW climbed because the period coincided with the privatization of public housing. The first half of 1990’s, however, saw a steep decline in hou seholds use of withdrawn equity.In fact there was a brief period when there was a net injection of equity into the housing stock. It could be argued that this was a reflection of a rational economic behaviour on the part of homeowners’ as they assessed a downward trend in housing prices as being detrimental to their long term finances. With a declining value of their housing wealth, UK’s homeowners cut back on withdrawals. Since the mid-1990’s price boom, that downward trend in MEW was quickly reversed. This period saw MEW grow faster than housing prices hinting at the possibility of a overly optimistic body of borrowers who expected housing prices and equity accumulation to continue rising at an ever increasing rate. Since at least part of the MEW is withdrawn by homeowners re-mortgaging their houses (see Table 2), this translates into loans secured by their properties. Halifax – BOS (2005) offer compelling evidence in this respect. They report that in 2 004, total gross lending secured by dwellings was an astronomical  £291 billion – 4% more than the previous year. The figure that was a mere  £57 billion in 1995, doubled by 1999 and with growth rates sometimes exceeding 35% had risen to five times that level in 2004. This monumental withdrawal can be interpreted as a major windfall for the homeowners who suddenly found themselves swimming in an ocean of purchasing power made available by the housing market. The other channel through which housing wealth engenders greater purchasing power in the hands of homeowners is comparatively subtle mechanism. Bridges et al (2004) discuss in great detail, how even without using their property s collateral, homeowners have gained access to ever rising amounts of unsecured credit. The rising value of housing wealth was interpreted by banks and other lenders as indicative of greater borrowing ability, i.e. greater creditworthiness. Naturally, this perception of the lenders was shaped, in part, by expectations of continuous a housing boom. A side implication of this phenomenon is that homeownership in the UK had become a screening device or filter for lenders’ decisions about whom to consider for loans. It follows that this would place renters at a disadvantage with respect to access to credit. Several studies, including Bridges at al (2004) have cited evidence of homeowners being supplied credit on terms far more favorable than those offered to non-owners. It can be reasonably expected that a large portion of the unsecured borrowing was directed toward consumption. Critical to both these channels is the issue of the ease with homeowners are able to obtain credit in lieu of their housing wealth. The mere existence of mortgage equity must be complemented with an efficient system to gain access to it for the wealth effect to take place. Benito (2004), Bridges et al (2004), and Her Majesty’s Treasury (2003) all stress that the liberalization of UK’s financial system that began in 1979 (see footnote 6 in Sec. 2) has been instrumental in creating a credit market that has facilitated the historic levels of MEW. With rising competition among banks and building societies and tremendous product innovation, the lending industry has created a series of affordable and accessible ways in which homeowners can obtain credit. All three studies portray the boom in housing prices and MEW in the UK as unique as compared to all other OECD economies. The coincidence of rising housing prices created huge reserves of withdrawable mortgage equity and supply-side changes in the form of lower restrictions on lending practices and other financial reform is responsible for the explosion in MEW sin