Eli F. Heckscher

Student of David Davidson at Uppsala and subsequently a docent under Cassel at Stockholm, Eli Heckscher nonetheless abandoned his mentors to blaze his own path in economic history and the history of economic thought. Incomparably prolific, Eli Heckscher’s bibliography boasts of over a thousand publications His most famous contribution to economics, his 1919 article

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Engel’s Law (1857)

Formulated by German-born statistician Ernst Engel (1821-1896), Engel’s Law states that as incomes increase, the proportion of income spent on food falls. Engel’s Law is accepted as a basic principle of income and consumption. SOURCE: E ENGEL, DIE PRODUCTIONS UND CONSUMPTIONS-VERHALTNISSE DES KÖNIGSREICHE SACHSEN (BERLIN, 1877) Engel’s law is an observation in economics stating that, as income rises, the proportion of

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Entitlement theorem

Entitlement theorem is a precept of distributive justice which maintains that individuals are entitled to their goods provided these were obtained by socially acceptable means such as sale, purchase, or as gifts. Also see: Rawls theory of justice Source: J Rawls, A Theory of Justice (Oxford, 1971) While an earned sense of entitlement is usually

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Envelope theorem (1931)

Originally proposed by Canadian economist Jacob Viner (1892-1970) and later developed by American economist Paul Samuelson (1915- ), envelope theorem refers to a curve that encloses an entire family of curves, each of which contributes at least one point to the envelope. The primary use of the envelope curve is in relating long-run to short-run cost curves. It

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Equal sacrifice theory

The surrender of equal measures of utility by taxpayers. Equal sacrifice theory has three sub-groups: 1. Equal absolute sacrifice (where each taxpayer surrenders the same absolute degree of utility that he obtains from his income). 2. Equal proportional sacrifice (where each sacrifices the same proportion of utility he receives from his income). 3. Equal marginal sacrifice (where

Equilibrium theory

Body of analysis examining the balance of interrelated variables of an economy and their tendency to resist change. Classical economic theory, outlined by Scottish economist Adam Smith (1723-1790) and English economist David Ricardo (1772-1823), regarded market prices as fluctuating around the natural price (which can be considered a central price towards which market prices tend). Another feature of

Erik Lindahl (1891-1960)

Probably the most theoretically rigorous member of the Stockholm School, Erik Lindahl was the only member of that group who stayed wholly within academia. Although he obtained his degree at Lund and was highly influenced by Knut Wicksell, he was not Wicksell’s student. Lindahl’s contributions to economic theory extend beyond his Wicksellian roots to embrace

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Ernst Engel (1821-1896)

German statistician, the head of the Prussian Statistical Bureau (1860-1882), known for the “Engel curve,” or Engel’s law, which states that the proportion of expenditure on food will fall as income rises, i.e. food is a necessary good. Engel’s law applies to goods as a whole. Demand for food, clothing and shelter – and for

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On Liberty – Chapter 1: Introductory

by John Stuart Mill The subject of this Essay is not the so-called Liberty of the Will, so unfortunately opposed to the misnamed doctrine of Philosophical Necessity; but Civil, or Social Liberty: the nature and limits of the power which can be legitimately exercised by society over the individual. A question seldom stated, and

On Liberty – Chapter 2: Of the liberty of thought and discussion

by John Stuart Mill The time, it is to be hoped, is gone by when any defence would be necessary of the “liberty of the press” as one of the securities against corrupt or tyrannical government. No argument, we may suppose, can now be needed, against permitting a legislature or an executive, not identified

On Liberty – Chapter 3: On individuality, as one of the elements of well-being

by John Stuart Mill Such being the reasons which make it imperative that human beings should be free to form opinions, and to express their opinions without reserve; and such the baneful consequences to the intellectual, and through that to the moral nature of man, unless this liberty is either conceded, or asserted in

On Liberty – Chapter 4: Of the limits to the authority of society over the individual

by John Stuart Mill What, then, is the rightful limit to the sovereignty of the individual over himself? Where does the authority of society begin? How much of human life should be assigned to individuality, and how much to society? Each will receive its proper share, if each has that which more particularly concerns

On Liberty – Chapter 5: Applications

by John Stuart Mill The principles asserted in these pages must be more generally admitted as the basis for discussion of details, before a consistent application of them to all the various departments of government and morals can be attempted with any prospect of advantage. The few observations I propose to make on questions

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Eugen Slutsky

Eugen Slutsky (a.k.a. Eugene Slutsky and Yevgeni Slutsky) intended to become a mathematician, but he was expelled from the University of Kiev for participating in student revolts and, after some wandering through engineering and Europe, he returned to Kiev and ended up getting a doctorate in law in the end and then heading to

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Euler’s theory (18TH CENTURY)

Devised by Swiss mathematician Leonhard Euler (1707-1783), Euler’s theory is a theory of distribution based on marginal productivity. Euler showed that under constant returns to scale, if each factor of production is paid the value of its marginal product, total output (income) will be completely exhausted. Also see: adding-up problem, marginal productivity theory of distribution, returns to scale Source: L

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Evsey Domar

A Russian-born, Manchurian-raised, MIT economist, Evsey Domar has made contributions in three main areas of economics: economic growth, comparative economics and economic history. His work on economic growth began with his 1944 model on government debt, which considered how economic growth can lighten the burden of the government debt. His major claim to fame,

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Evolutionary Theory of the Firm

Nelson and Winter argue that an evolutionary theory of organization is a superior description of firm behavior than orthodox views around optimization and that routines act as the genes of the firms in their model. The evolutionary theory defines the firm as a set of essential skills, gained from its learning ability. The theoretical

Exploitation

Exploitation occurs where a person or institution systematically gives to another rewards or services or goods disproportionately smaller than that other person’s efforts or contribution would justify, and retains for them-self a correspondingly greater amount. Source: David Miller et al., eds, The Blackwell Encyclopaedia of Political Thought (Oxford, 1987) Exploitation may refer to: Exploitation of

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Externalities (20TH CENTURY)

Arthur Cecil Pigou (1877-1959) developed earlier work by fellow English economists HENRY SIDGWICK (1838-1900) and Alfred Marshall (1842-1924) into an important feature of modern economic theory. Economic activity generates costs and benefits, some of which are not incurred/enjoyed by the person performing the activity. When, for example, a company pollutes the environment, it may enjoy efficient production

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Factor price equalization theorem (20TH CENTURY)

Formulated by American economist Paul Samuelson (1915- ) on the basis of the Heckscher-Ohlin Trade Theory, factor price equalization theorem postulates that free trade in commodities will eliminate price differentials, thereby effecting an equalization of factor prices; especially wages and interest rates. Also see: comparative costs, absolute advantage theory, customs union theory, rybczynski theorem Source: A P Lerner, ‘Factor Prices and

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