- Industry: Economy; Printing & publishing
- Number of terms: 15233
- Number of blossaries: 1
- Company Profile:
The easier it is for the factors of production to move to where they are most valuable, the more efficient the allocation of the world’s scarce resources is likely to be and the faster GDP will grow. Apart from continental drift, land is immobile. Capital has long been extremely mobile within countries, and, with the rise of globalization, it is now able to move easily around the world. Enterprise is mobile, although to what extent depends on the particular entrepreneur. Some members of the labor market zoom around the world to work; others will not move to the next town. Capital controls are the main obstacle to capital mobility, and these have been mostly removed or reduced since 1980. The sources of labor immobility are more numerous and complex, including immigration controls, transport costs, language barriers and a reluctance to move away from family or friends. Workers are far more mobile within the United States than they are within the European Union or within individual EU countries. Some economists reckon that the willingness of workers to move to where the work is helps to explain the stronger economic performance and lower unemployment of the United States. Can you sometimes have too much mobility? Certainly, some developing countries have suffered from hot money rushing into and then out of their markets. In general, the possibility that a factor of production may suddenly move elsewhere can create serious economic problems. For instance, an employer may think twice about investing in training an employee if it fears that the employee may suddenly take a job with another firm. Similarly, entrepreneurs are unlikely to take the risk of pursuing a new idea if they fear that their capital may disappear at any moment, hence the importance of having access to long-term capital, such as by issuing bonds and equities.
Industry:Economy
The conventional economic wisdom of the 17th century that made a partial come-back in recent years. Mercantilists feared that money would become too scarce to sustain high levels of output and employment; their favored solution was cheap money (low interest rates). In a forerunner to the 20th-century debate between Keynesians and monetarists, they were opposed by advocates of classical economics, who argued that cheap and plentiful money could result in inflation. The original mercantilists, such as John Law, a Scots financier (and convicted murderer), believed that a country’s economic prosperity and political power came from its stocks of precious metals. To maximize these stocks they argued against free trade, favoring protectionist policies designed to minimize imports and maximize exports, creating a trade surplus that could be used to acquire more precious metal. This was contested for the classicists by Adam Smith and David Hume, who argued that a country’s wealth came not from its stock of precious metals but rather from its stocks of productive resources (land, labor, capital, and so on) and how efficiently they are used. Free trade increased efficiency by allowing countries to specialize in things in which they have a comparative advantage.
Industry:Economy
Loved and loathed; perhaps the most influential economist of his generation. He won the Nobel Prize for economics in 1976, one of many Chicago school economists to receive that honor. He has been recognized for his achievements in the study of consumption, monetary history and theory, and for demonstrating how complex policies aimed at economic stabilization can be. A fierce advocate of free markets, Mr. Friedman argued for monetarism at a time when Keynesian policies were dominant. Unusually, his work is readily accessible to the layman. He argues that the problems of inflation and short-run unemployment would be solved if the Federal Reserve had to increase the money supply at a constant rate. Like Adam Smith and Friedrich Hayek, who inspired him, Mr. Friedman praises the free market not just for its economic efficiency but also for its moral strength. For him, freedom--economic, political and civil--is an end in itself, not a means to an end. It is what makes life worthwhile. He has said he would prefer to live in a free country, even if it did not provide a higher standard of living, than a country run by an alternative regime. However, the likelihood of a free country being poorer than an unfree one strikes him as implausible; the economic as well as the moral superiority of free markets is, he has declared, "now proven". An adviser to Richard Nixon, he was disappointed when the president went against the spirit of monetarism in 1971 by asking him to urge the chairman of the Fed to increase the money supply more rapidly. The 1980s economic policies of Margaret Thatcher and General Pinochet were inspired--and defended--by Mr. Friedman. However, in 2003, he admitted that one of those policies, the targeting of the money supply, had "not been a success" and that he doubted he would "as of today push it as hard as I once did".
Industry:Economy
Somewhere between short-termism, which is bad, and the long run, lies the hallowed ground of the medium term – far enough away to discourage myopic behavior by decision makers but close enough to be meaningful. But not many governments say exactly how long they think the medium term is.
Industry:Economy
Probably the most successful program of international aid and nation building in history. It was named after General George Marshall, an American secretary of state, who at the end of the second world war proposed giving aid to Western Europe to rebuild its war-torn economies. North America gave around 1% of its GDP in total between 1948 and 1952; most of it came from the United States and the rest from Canada. The Americans left it to the Europeans to work out the details on allocating aid, which may be why, according to most economic analyses, it achieved more success than latter day aid programs in which most of the decisions on how the money is spent are made by the donors. The main institution through which aid was administered was the Organization for European Economic Co-operation (OEEC), which in 1961 became the OECD. Nowadays, whenever there is a proposal for the international community to rebuild an economy damaged by war, such as Iraq's in 2003, you are sure to hear the phrase “new Marshall Plan”.
Industry:Economy
When one buyer or seller in a market has the ability to exert significant influence over the quantity of goods and services traded or the price at which they are sold. Market power does not exist when there is perfect competition, but it does when there is a monopoly, monopsony or oligopoly.
Industry:Economy
Shorthand for the pressures from buyers and sellers in a market, rather than those coming from a government planner or from regulation.
Industry:Economy
The market value of a company’s shares: the quoted share price multiplied by the total number of shares that the company has issued.
Industry:Economy
Making things like cars or frozen food has shrunk in importance in most developed countries during the past half century as services have grown. In the United States and the UK, the proportion of workers in manufacturing has shrunk since 1900 from around 40% to barely 20%. More than two-thirds of output in OECD countries, and up to four-fifths of employment, is now in the services sector. At the same time, manufacturing has grown in importance in developing countries. Many people think that manufacturing somehow matters more than any other economic activity and is in some way superior to surfing the Internet or cutting somebody’s hair. This is prob¬ably nothing more than nostalgia for times past when making things in factories was what real men did, just as 150 years ago growing things in fields was what real men did. Mostly, the shift from manufacturing to services (as with the earlier shift from agriculture to manufacturing) reflects progress into jobs that create more utility, this time for real women as well as real men, which may explain why it is happening first in richer countries.
Industry:Economy
The big picture: analyzing economy-wide phenomena such as growth, inflation and unemployment. Contrast with microeconomics, the study of the behavior of individual markets, workers, households and firms. Although economists generally separate themselves into distinct macro and micro camps, macroeconomic phenomena are the product of all the microeconomic activity in an economy. The precise relationship between macro and micro is not particularly well understood, which has often made it difficult for a government to deliver well-run macroeconomic policy.
Industry:Economy
