- Industry: Economy; Printing & publishing
- Number of terms: 15233
- Number of blossaries: 1
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At the start of the 21st century, the total output of the American economy weighed roughly the same as it did 100 years earlier. Yet the value of that output, in real terms, was 20 times greater. Output is increasingly weightless, produced from intellectual capital rather than physical materials. Production has shifted from steel, heavy copper wire and vacuum tubes to microprocessors, fine fiber-optic cables and transistors. Services have increased their share of GDP. This weightless or dematerialized economy, most economists agree, is not just lighter but also more efficient.
Industry:Economy
Americans use welfare as shorthand for government handouts to the poor. Economists use it to describe the well being of an individual or society, as in “Are tax cuts welfare-enhancing?”. This is economist-speak for “Will tax cuts improve the overall well being of the country?” (See utility. )
Industry:Economy
Economics with a heart. The study of how different forms of economic activity and different methods of allocating scarce resources affect the well being of different individuals or countries. Welfare economics focuses on questions about equity as well as efficiency.
Industry:Economy
Active labor market policies, in which government handouts to the unemployed come with strings attached, designed to get the recipient off welfare and back to work as quickly as possible.
Industry:Economy
Income you do not expect, such as winning a lottery prize. Economists have long argued about whether people are likely to save such windfalls or spend them. According to the permanent income hypothesis, favored by most economists, people save the lion's share of windfall gains. But real life often contradicts this; ask any lottery winner.
Industry:Economy
A controversial concept, often used by politicians to justify imposing a tax on profit that in theory is earned unexpectedly, through circumstances beyond the control of the company concerned, and is thus deemed undeserved and ripe for the taking by the tax authorities. As the profits were neither expected nor a result of the efforts of the firm, taxing them should not harm the firm’s incentives to maximize future profits. The problem comes when greedy politicians start claiming that profits are windfalls when in fact they are deserved and expected. Then taxing them sends a signal to firms that they should not try too hard to make profits, as if they do too well they will not get to keep the profits anyway. If this became widely believed, effort would probably decline and economic growth would be slower.
Industry:Economy
No time for losers. In certain jobs, the market pays individuals not according to their absolute performance but according to their performance relative to others. The income of window cleaners depends upon how many windows they clean, but investment bankers’ pay may depend upon their performance ranking. Slightly more talented window cleaners will make only a small difference to the transparency of their customers’ windows, but in the markets for selling bonds that slight edge can mean everything. Rewards at the top are therefore disproportionately high, and rewards below the top are disproportionately low. People in these professions are often willing to work for very little just to have the chance to compete for the top job and the jackpot that comes with it. This sort of economics has long been prevalent in celebrity-dominated businesses such as entertainment and sport. But this reward structure is spreading to more and more occupations, including journalism, the law, medicine and corporate management. Globalization has expanded the market for skills, increasing the opportunities for the rich to become even richer. In a normal market, sumptuous superstar incomes would attract competition from more applicants to do the jobs that pay them. This would then bring salaries down to less exotic levels. In a winner-takes-all market, this does not happen. An investment bank wants the best analysts and dealers; second best will not do. It can also afford to pay. Some economists believe that because of more liberalized markets there will be growing inequality in most professions and the emergence of a winner-takes-all society.
Industry:Economy
A tax that is collected at source, before the taxpayer has seen the income or capital to which the tax applies. In other words, that part of the income or capital due in tax is withheld from the taxpayer, who therefore cannot easily avoid paying the tax. Withholding taxes are frequently imposed on interest and dividends.
Industry:Economy
An institution created with the IMF at Bretton Woods in 1944 and opened in 1946. The World Bank has three main branches: the International Bank for Reconstruction and Development (IBRD), the International Development Agency (IDA) and the International Finance Corporation (IFC). Collectively, it aims to promote economic development in the world’s poorer countries through advice and long-term lending, averaging $30 ¬billion a year, spread around 100 countries. Critics of the World Bank say that it often worsens the problems facing developing countries. Its advice has often been guided by economic fashion, which led it to support a centrally planned brand of development economics in the 1960s and 1970s, before switching to privatization and structural adjustment in the 1980s and then to promoting democracy and economic transparency, and attacking crony capitalism, in the late 1990s. Until recently, it has generally supported big, ¬high-profile projects rather than more economically useful smaller schemes. It has often failed to ensure that its loans have been spent on the intended project. Its willingness to pump money into struggling countries creates a potential moral hazard, in which politicians may have little incentive to govern well because they believe that, if they do a bad job, the World Bank will come to the rescue. The increase in private-sector lending to and investment in emerging markets has led to growing discussion of whether the World Bank is any longer needed.
Industry:Economy
Bête noire of anti-globalization protesters. The World Trade Organization is the governing body of international trade, setting and enforcing the rules of trade and punishing offenders. Established during the Uruguay Round of talks under the general agreement on tariffs and trade (GATT), it opened for business in 1995 with a membership of 132 countries (rising to 146 by 2003). Countries used to break GATT rules with impunity. They seem to be finding it harder to do so under the WTO. Even so, protestors complain that it does not promote fair trade but does promote the interest of rich countries over poorer one. Supporters of free trade, including The Economist, reckon that all countries are better off as part of a well-regulated international trading system, and that the WTO is the most likely source of the good regulation that is needed.
Industry:Economy
