- Sektör: Economy; Printing & publishing
- Number of terms: 15233
- Number of blossaries: 1
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A tax that takes a smaller proportion of income as the taxpayer’s income rises, for example, a fixed-rate vehicle tax that eats up a much larger slice of a poor person’s income than a rich person’s income. This goes against the principle of vertical equity, which many people think should be at the heart of any fair tax system.
Industry:Economy
The stalking-horse for international capitalism. A focus for all the worries about environmental damage, human-rights abuses and sweated labor that opponents of globalization like to put on their placards. A symbol of America's corporate power, since most of the world's best-known brands, from Coca Cola to Nike, are American. That is the case against. Many economists regard brands as a good thing, however. A brand provides a guarantee of reliability and quality. Consumer trust is the basis of all brand values. So companies that own the brands have an immense incentive to work to retain that trust. Brands have value only where consumers have choice. The arrival of foreign brands, and the emergence of domestic brands, in former communist and other poorer countries points to an increase in competition from which consumers gain. Because a strong brand often requires expensive advertising and good marketing, it can raise both price and barriers to entry. But not to insuperable levels: brands fade as tastes change; if quality is not maintained, neither is the brand.
Industry:Economy
Rules governing the activities of private-sector enterprises. Regulation is often imposed by government, either directly or through an appointed regulator. However, some industries and professions impose rules on their members through self-regulation. Regulation is often introduced to tackle market failure. Externalities such as pollution have inspired rules limiting factory emissions. Regulations on the selling of financial products to individuals have been introduced as protection against unscrupulous financial firms with better information than their customers. Rate of return regulation and price regulation have been used to combat natural monopoly, sometimes instead of nationalization. Some regulation has been motivated by politics rather than economics, for instance, restrictions on the number of hours people can work or the circumstances in which an employer can dismiss employees. Even when introduced for sound economic reasons, regulation can generate more costs than benefits. Regulated firms or individuals may face substantial compliance costs. Firms may devote substantial resources to regulatory arbitrage, which would leave consumers no better off. Regulation may lead to moral hazard if people believe that the government is keeping an eye on the behavior of the regulated business and so do less monitoring of their own. Regulation may be badly designed and thus lock an industry into an inefficient equilibrium. Rigid regulation may hold back innovation. There is also the danger of regulatory capture. In short, then, regulatory failure may be even worse for an economy than market failure.
Industry:Economy
A theory of human decision making that assumes that people behave rationally, but only within the limits of the information available to them. Because their information may be inadequate (bounded) they make take decisions that appear to be irrational according to traditional theories about homo economicus (economic man). (See also behavioral economics. )
Industry:Economy
Exploiting loopholes in regulation, and perhaps making the regulation useless in the process. This is often done by international investors that use derivatives to find ways around a country’s financial regulations.
Industry:Economy
Gentlemen prefer bonds, punned Andrew Mellon, an American tycoon. A bond is an interest-bearing security issued by governments, companies and some other organizations. Bonds are an alternative way for the issuer to raise capital to selling shares or taking out a bank loan. Like shares in listed companies, once they have been issued bonds may be traded on the open market. A bond's yield is the interest rate (or coupon) paid on the bond divided by the bond's market price. Bonds are regarded as a lower risk investment. Government bonds, in particular, are highly unlikely to miss their promised payments. Corporate bonds issued by blue-chip "investment grade" companies are also unlikely to default; this might not be the case with high-yield "junk" bonds issued by firms with less healthy financials. (See yield curve. )
Industry:Economy
Gamekeeper turns poacher or, at least, helps poacher. The theory of regulatory capture was set out by Richard Posner, an economist and lawyer at the University of Chicago, who argued that “regulation is not about the public interest at all, but is a process, by which interest groups seek to promote their private interest. . . Over time, regulatory agencies come to be dominated by the industries regulated. ” Most economists are less extreme, arguing that regulation often does good but is always at risk of being captured by the regulated firms.
Industry:Economy
A formula for pricing financial options. Its invention allowed a previously undreamed of precision in the pricing of options (which had hitherto been done using crude rules of thumb), and probably made possible the explosive growth in the markets for options and other derivatives that took place after the formula became widely used in the early 1970s. Myron Scholes and Robert Merton were awarded the Nobel Prize for economics for their part in devising the formula; their co-inventor, Fischer Black (1938—95), was ineligible, having died.
Industry:Economy
How firms keep out competition--an important source of incumbent advantage. There are four main sorts of barriers. * A firm may own a crucial resource, such as an oil well, or it may have an exclusive operating license, for instance, to broadcast on a particular radio wavelength. * A big firm with economies of scale may have a significant competitive advantage because it can produce a large output at lower costs than can a smaller potential rival. * An incumbent firm may make it hard for a would-be entrant by incurring huge sunk costs, spending lots of money on things such as advertising, which any rival must match to compete effectively but which have no value if the attempt to compete should fail. * Powerful firms can discourage entry by raising exit costs, for example, by making it an industry norm to hire workers on long-term contracts, which make firing an expensive process.
Industry:Economy
