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Economics: An A-Z Guide

Book Description

Economics is the ’study of how society uses its scarce resources’ or, more snappily, ’the science of choices’ that helps people make decisions about how to use such scarce things as land, labour, raw materials, capital, entrepreneurial spirit and time. An understanding of economics can therefore help people in politics and public service, in business and the professions, and even in their private life make decisions that will produce the results they are seeking to achieve. This book is a clear and lively guide to the essentials of economics, with entries that stretch from A to Z and cover such topics, terms and jargon as: Animal spirits, Barter, Cannibalise, Dumping, Economic man, First-mover advantage, Gresham’s Law, Hypothecation, Inequality, J-curve, Kleptocracy, Lump of labour fallacy, Money illusion, New economy, Opportunity cost, Positional goods, Queueing, Random walk, Satisficing, Tragedy of the commons, Utility, Value at risk, Winner-takes-all markets, X-efficiency, Yield gap and Zero-sum game.

Table of Contents

  1. Cover
  2. Introduction
  3. Economics at the crossroads
    1. What is economics?
    2. The return of big government
    3. Saving the world
  4. A
    1. Absolute advantage
    2. Adaptive expectations
    3. Advance market commitment
    4. Adverse selection
    5. Advertising
    6. Agency costs
    7. Agflation
    8. Agriculture
    9. Agricultural policy
    10. Aid
    11. Altruism
    12. Amortisation
    13. Animal spirits
    14. Antitrust
    15. Appreciation
    16. Arbitrage
    17. Arbitrage pricing theory
    18. Asian crisis
    19. Asset-backed securities
    20. Assets
    21. Asymmetric information
    22. Asymmetric shock
    23. Auctions
    24. Austrian economics
    25. Autarky
    26. Authoritarian capitalism
    27. Average
  5. B
    1. Backwardation
    2. Balance of payments
    3. Balanced budget
    4. Bank
    5. Bankruptcy
    6. Barriers to entry (or exit)
    7. Barter
    8. Basel 1 and 2
    9. Basis point
    10. Behavioural economics
    11. Bear
    12. Beta
    13. Big Mac index
    14. Black economy
    15. Black-Scholes
    16. Black swan
    17. Bonds
    18. Boom and bust
    19. Bottom of the pyramid
    20. Bounded rationality
    21. Brand
    22. Bretton Woods
    23. BRIC
    24. Bubble
    25. Budget
    26. Bull
    27. Business confidence
    28. Business cycle
    29. Buyer’s market
  6. C
    1. Cannibalise
    2. Capacity
    3. Capital
    4. Capital adequacy ratio
    5. Capital asset pricing model
    6. Capital controls
    7. Capital flight
    8. Capital gains
    9. Capital intensive
    10. Capital markets
    11. Capitalism
    12. Capital structure
    13. CAPM
    14. Cartel
    15. Catch-up effect
    16. CDO
    17. CDS
    18. Central bank
    19. Ceteris paribus
    20. Charity
    21. Chicago School
    22. Classical dichotomy
    23. Classical economics
    24. Closed economy
    25. Coase theorem
    26. Collateral
    27. Collateralised debt obligation
    28. Collusion
    29. Command economy
    30. Commodity
    31. Commoditisation
    32. Common goods
    33. Communism
    34. Comparative advantage
    35. Competition
    36. Competitive advantage
    37. Competitiveness
    38. Complementary goods
    39. Compound interest
    40. Concentration
    41. Conditionality
    42. Consumer confidence
    43. Consumer prices
    44. Consumer surplus
    45. Consumption
    46. Contagion
    47. Contestable market
    48. Convergence
    49. Corruption
    50. Cost-benefit analysis
    51. Cost of capital
    52. Creative capitalism
    53. Creative destruction
    54. Credit
    55. Credit creation
    56. Credit crunch
    57. Credit default swap
    58. Creditor
    59. Crony capitalism
    60. Crowding out
    61. Crowds
    62. Currency board
    63. Currency peg
    64. Currency swap
    65. Current account
    66. Cyclical unemployment
  7. D
    1. Deadweight cost/loss
    2. Debt
    3. Debt forgiveness
    4. Debt-equity ratio
    5. Decoupling
    6. Default
    7. Deficit
    8. Deflation
    9. Demand
    10. Demand curve
    11. Demographics
    12. Deposit insurance
    13. Depreciation
    14. Depression
    15. Deregulation
    16. Derivatives
    17. De Soto, Hernando
    18. Devaluation
    19. Developing countries
    20. Development economics
    21. Diminishing returns
    22. Direct taxation
    23. Discounted cash flow
    24. Discount rate
    25. Diseconomies of scale
    26. Disequilibrium
    27. Disinflation
    28. Disintermediation
    29. Diversification
    30. Dividend
    31. Division of labour
    32. Dollarisation
    33. Dominant firm
    34. Dumping
  8. E
    1. Econometrics
    2. Economic and monetary union
    3. Economic indicator
    4. Economic man
    5. Economic rent
    6. Economics
    7. Economic sanctions
    8. Economies of scale
    9. Effective exchange rate
    10. Efficiency
    11. Efficiency wages
    12. Efficient market hypothesis
    13. Elasticity
    14. Emerging markets
    15. Emissions trading
    16. Endogenous
    17. Engel’s law
    18. Enron
    19. Enterprise
    20. Entrepreneur
    21. Environmental economics
    22. Equilibrium
    23. Equities
    24. Equity
    25. Equity risk premium
    26. Ethical consumerism
    27. Euro
    28. Eurodollar
    29. European Central Bank
    30. European Union
    31. Euro zone
    32. Evolutionary economics
    33. Excess returns
    34. Exchange controls
    35. Exchange rate
    36. Exogenous
    37. Expectations
    38. Expected returns
    39. Expenditure tax
    40. Export credit
    41. Exports
    42. Externality
  9. F
    1. Factor cost
    2. Factors of production
    3. Factory prices
    4. Fair trade
    5. FDI
    6. Federal Reserve System
    7. Financial centre
    8. Financial instrument
    9. Financial intermediary
    10. Financial literacy
    11. Financial markets
    12. Financial system
    13. Fine tuning
    14. Firms
    15. First-mover advantage
    16. Fiscal drag
    17. Fiscal neutrality
    18. Fiscal policy
    19. Fixed costs
    20. Flotation
    21. Forecasting
    22. Foreign direct investment
    23. Forward contracts
    24. Free lunch
    25. Free riding
    26. Free trade
    27. Frictional unemployment
    28. Friedman, Milton
    29. Full employment
    30. Fungible
    31. Futures
  10. G
    1. G7, G8, G10, G20, G21, G22, G33
    2. Game theory
    3. GATT
    4. GDP
    5. Gearing
    6. General Agreement on Tariffs and Trade
    7. General equilibrium
    8. Generational accounting
    9. Giffen goods
    10. Gilts
    11. Gini coefficient
    12. Globalisation
    13. Global public goods
    14. GNI
    15. GNP
    16. Gold
    17. Gold standard
    18. Golden rule
    19. Government
    20. Government bonds
    21. Government debt
    22. Government expenditure
    23. Government revenue
    24. Government-sponsored enterprise
    25. Great moderation
    26. Greenspan, Alan
    27. Gresham’s law
    28. Gross domestic product
    29. Gross national product
    30. Growth
    31. GSE
  11. H
    1. Hard currency
    2. Hawala
    3. Hayek, Friedrich
    4. Hedge
    5. Hedge funds
    6. Herfindahl-Hirschman index
    7. Homo economicus
    8. Horizontal equity
    9. Horizontal integration
    10. Hot money
    11. House prices
    12. Human capital
    13. Human Development Index
    14. Hyperinflation
    15. Hypothecation
    16. Hysteresis
  12. I
    1. ILO
    2. IMF
    3. Imperfect competition
    4. Imports
    5. Income
    6. Income effect
    7. Income tax
    8. Incumbent advantage
    9. Indexation
    10. Index numbers
    11. Indifference curve
    12. Indirect taxation
    13. Inelastic
    14. Inequality
    15. Infant industry
    16. Inferior goods
    17. Inflation
    18. Inflation target
    19. Information
    20. Infrastructure
    21. Innovation
    22. Insider trading
    23. Institutional economics
    24. Institutional investors
    25. Insurance
    26. Intangible assets
    27. Intellectual capital
    28. Intellectual property
    29. Interest
    30. Interest rate
    31. International aid
    32. International Labour Organisation
    33. International Monetary Fund
    34. International trade
    35. Intervention
    36. Investment
    37. Invisible hand
    38. Invisible trade
    39. Inward investment
    40. Irrational exuberance
  13. J
    1. J-curve
    2. Job search
    3. Joint supply
  14. K
    1. Keynes, John Maynard
    2. Keynesian
    3. Kleptocracy
    4. Kondratieff wave
  15. L
    1. Labour
    2. Labour intensive
    3. Labour market flexibility
    4. Labour theory of value
    5. Laffer curve
    6. Lagging indicators
    7. Laissez-faire
    8. Land
    9. Land tax
    10. Law and economics
    11. LBO
    12. Leading indicators
    13. Lender of last resort
    14. Leverage
    15. Leveraged buy-out
    16. Liberal economics
    17. Liberalisation
    18. LIBOR
    19. Life
    20. Life-cycle hypothesis
    21. Liquidity
    22. Liquidity preference
    23. Liquidity premium
    24. Liquidity trap
    25. Lock-in
    26. Long run
    27. Long tail
    28. Lump of labour fallacy
    29. Lump-sum tax
    30. Luxuries
  16. M
    1. Macroeconomics
    2. Macroeconomic policy
    3. Manufacturing
    4. Marginal
    5. Market capitalisation
    6. Market failure
    7. Market forces
    8. Market power
    9. Marshall, Alfred
    10. Marshall Plan
    11. Marx, Karl
    12. Mean
    13. Mean reversion
    14. Median
    15. Medium term
    16. Menu costs
    17. Mercantilism
    18. Mergers and acquisitions
    19. Microeconomics
    20. Microfinance
    21. Minimum wage
    22. Misery index
    23. Mixed economy
    24. Mobility
    25. Mode
    26. Modelling
    27. Modern portfolio theory
    28. Monetarism
    29. Monetary neutrality
    30. Monetary policy
    31. Money
    32. Money illusion
    33. Money markets
    34. Money supply
    35. Monopolistic competition
    36. Monopoly
    37. Monopsony
    38. Moral hazard
    39. Most-favoured nation
    40. Multiplier
  17. N
    1. NAFTA
    2. NAIRU
    3. Nash equilibrium
    4. National debt
    5. National income
    6. Nationalisation
    7. Nation building
    8. Natural monopoly
    9. Natural rate of unemployment
    10. Negative income tax
    11. Neo-classical economics
    12. Net present value
    13. Network effect
    14. Neuroeconomics
    15. Neutrality
    16. New economy
    17. New growth theory
    18. New trade theory
    19. NGO
    20. Nobel Prize in Economics
    21. Nominal value
    22. Non-price competition
    23. Non-profit
    24. Normal goods
    25. Normative economics
    26. NPV
    27. Null hypothesis
  18. O
    1. OECD
    2. Offshore
    3. Offshoring
    4. Oil
    5. Okun’s law
    6. Oligopoly
    7. OPEC
    8. Open economy
    9. Open-market operations
    10. Opportunity cost
    11. Optimal currency area
    12. Optimum
    13. Option
    14. Output
    15. Output gap
    16. Outsourcing
    17. Outward investment
    18. Overheating
    19. Overshooting
    20. Over the counter
  19. P
    1. Paradox of thrift
    2. Pareto efficiency
    3. Paris Club
    4. Patents
    5. Path dependence
    6. Peak pricing
    7. Percentage point
    8. Percentile
    9. Perfect competition
    10. Permanent income hypothesis
    11. Philanthrocapitalism
    12. Phillips curve
    13. Pigou effect
    14. Plaza Accord
    15. Population
    16. Positional goods
    17. Positive economics
    18. Poverty
    19. Poverty trap
    20. PPP
    21. Precautionary motive
    22. Predatory lending
    23. Predatory pricing
    24. Preference
    25. Present value
    26. Price
    27. Price discrimination
    28. Price/earnings ratio
    29. Price elasticity
    30. Price mechanism
    31. Price regulation
    32. Principal–agent theory
    33. Prisoner’s dilemma
    34. Private equity
    35. Privatisation
    36. Probability
    37. Producer prices
    38. Producer surplus
    39. Production function
    40. Productivity
    41. Profit
    42. Profit margin
    43. Profit maximisation
    44. Progressive taxation
    45. Propensity
    46. Property rights
    47. Prospect theory
    48. Protectionism
    49. Public goods
    50. Public spending
    51. Public–private
    52. Public utility
    53. Purchasing power parity
  20. Q
    1. Q theory
    2. Quantity theory of money
    3. Quartile
    4. Queueing
    5. Quota
  21. R
    1. Random walk
    2. Rate of return
    3. Rate of return regulation
    4. Ratings
    5. Rationality
    6. Rational expectations
    7. Rationing
    8. Real balance effect
    9. Real exchange rate
    10. Real interest rate
    11. Real options theory
    12. Real terms
    13. Recession
    14. Reciprocity
    15. Redlining
    16. Reflation
    17. Regional policy
    18. Regression analysis
    19. Regressive tax
    20. Regulation
    21. Regulatory arbitrage
    22. Regulatory capture
    23. Regulatory failure
    24. Regulatory risk
    25. Relative income hypothesis
    26. Remittances
    27. Rent
    28. Rent-seeking
    29. Replacement cost
    30. Replacement rate
    31. Repo
    32. Required return
    33. Rescheduling
    34. Reservation wage
    35. Reserve currency
    36. Reserve ratio
    37. Reserves
    38. Reserve requirements
    39. Residual risk
    40. Restrictive practice
    41. Returns
    42. Revealed preference
    43. Ricardian equivalence
    44. Ricardo, David
    45. Risk
    46. Risk averse
    47. Risk-free rate
    48. Risk management
    49. Risk neutral
    50. Risk premium
    51. Risk seeking
    52. R squared
  22. S
    1. Safe harbour
    2. Satisficing
    3. Savings
    4. Say’s law
    5. Scalability
    6. Scarcity
    7. Scenario analysis
    8. Schumpeter, Joseph
    9. SDR
    10. Search costs
    11. Seasonally adjusted
    12. Secondary market
    13. Second-best theory
    14. Securities
    15. Securitisation
    16. Seller’s market
    17. Seignorage
    18. Seniority
    19. Sequencing
    20. Services
    21. Shadow banking
    22. Shadow price
    23. Shareholder value
    24. Shares
    25. Sharpe ratio
    26. Shock
    27. Shorting
    28. Short-termism
    29. Signalling
    30. Simple interest
    31. Smith, Adam
    32. Social benefits/costs
    33. Social capital
    34. Social enterprise
    35. Social entrepreneur
    36. Socialism
    37. Social market
    38. Soft currency
    39. Soft dollars
    40. Soft loan
    41. Soft paternalism
    42. Sovereign risk
    43. Sovereign wealth fund
    44. Speculation
    45. Speculative motive
    46. Spot price
    47. Spread
    48. Stabilisation
    49. Stability and Growth Pact
    50. Stagflation
    51. Stagnation
    52. Stakeholders
    53. Standard deviation
    54. Standard error
    55. Statistical significance
    56. Sterilised intervention
    57. Sticky prices
    58. Stochastic process
    59. Stocks
    60. Stress-testing
    61. Structural adjustment
    62. Structural unemployment
    63. Sub-prime
    64. Subsidy
    65. Substitute goods
    66. Substitution effect
    67. Sunk costs
    68. Supply
    69. Supply curve
    70. Supply-side policies
    71. Sustainable growth
    72. Swap
    73. Systematic risk
    74. Systemic risk
  23. T
    1. Tangible assets
    2. Tariff
    3. Taxation
    4. Tax arbitrage
    5. Tax avoidance
    6. Tax base
    7. Tax burden
    8. Tax competition
    9. Tax efficient
    10. Tax evasion
    11. Tax haven
    12. Tax incidence
    13. Taylor rule
    14. Technical progress
    15. Terms of trade
    16. Third way
    17. Tick
    18. Time value of money
    19. Time series
    20. Tobin, James
    21. Total return
    22. Trade
    23. Trade area
    24. Trade cycle
    25. Trade deficit/surplus
    26. Trade unions
    27. Trade-weighted exchange rate
    28. Tragedy of the commons
    29. Transaction costs
    30. Transfers
    31. Transfer pricing
    32. Transition economies
    33. Transmission mechanism
    34. Transparency
    35. Treasury bills
    36. Trough
    37. Trust
  24. U
    1. Uncertainty
    2. Underground economy
    3. Unemployment
    4. Unemployment trap
    5. Unions
    6. Usury
    7. Utility
  25. V
    1. Value added
    2. Value at risk
    3. Variable costs
    4. Velocity of circulation
    5. Venture capital
    6. Vertical equity
    7. Vertical integration
    8. Visible trade
    9. Volatility
    10. Voluntary unemployment
  26. W
    1. Wage drift
    2. Wages
    3. Wealth effect
    4. Wealth tax
    5. Weightless economy
    6. Welfare
    7. Welfare economics
    8. Welfare to work
    9. Windfall gains
    10. Windfall profit
    11. Winner’s curse
    12. Winner-takes-all markets
    13. Withholding tax
    14. World Bank
    15. World Trade Organisation
  27. X
    1. X-efficiency
  28. Y
    1. Yield
    2. Yield curve
    3. Yield gap
  29. Z
    1. Zero-sum game