Falling rate of profit (18TH-19TH CENTURY)

Falling rate of profit was held by all leading classical economists except the English writer Thomas De Quincey (1785-1859). Scottish economist Adam Smith (1723-1790) regarded the decline in profit as a result of ‘the competition of capitals’ whereas English economist David Ricardo (1772-1823) noted that diminishing returns in agriculture raised the real wage and reduced profits with which wages were

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Fine tuning (1960S)

Fine tuning is attributed to American economist Walter Heller (1915-1987), and is used to refer to a short-run interventionist approach to the economy using monetary and fiscal policies to control fluctuations in demand. A popular policy of British governments from 1945 to 1970, it involved altering fiscal policy continually to stabilize national income as close to its full-employment

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Fixed point theorems (1910)

First used in economic analysis by Hungarian-born mathematical economist John von Neumann (1903-1957) in 1937, as an extension of the mapping techniques developed earlier by German mathematician Luitzen Egbertus Jan Brouwer; fixed point theorems represent a macroeconomic approach setting out specific targets with regard to the aims of full employment, price stability, economic growth and balance of

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Forced saving (1912)

Given its current name by Austrian economist Ludwig von Mises (1881-1973), forced saving refers to an an involuntary reduction in consumption which arises when an economy is in full employment and when it has an excess supply of loans. The excess depresses the market rate of interest and stimulates demand for investment finance which precipitates general

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Francis Ysidro Edgeworth

Francis Edgeworth was a restless philosophy student at Cambridge on his way to Germany when he decided to elope with a teenage Catalonian refugee he met on the steps of the British Museum. One of the outcomes of their marriage was Ysidro Francis Edgeworth (the name order was reversed later), who was destined to

Francois Perroux (1903-1987)

François Perroux belongs to that small, strange group of unique Frenchmen who, in spite of the Anglophone dominance of economics, still manage to ocassionally infect the imagination of the economics world with their novel ideas. At Collège de France, Francois Perroux studied under Etienne Antonelli, the last lingering shadow of the Lausanne School. In

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Francois Quesnay

The humbly-born Francois Quesnay trained himself in medicine, rising to become a physician in Louis XV’s court and the leader of a sect of Enlightenment thinkers known as the Physiocrats or the economistes. The working-class boy who could not read until he was 11 was eventually elected to the Academy of Sciences and hailed

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Franco Modigliani

A student of Jacob Marschak’s at the New School for Social Research, Franco Modigliani, in the model presented in his Ph.D. thesis (1944), was to provide the nucleus of the Neo-Keynesian Synthesis of post-war macroeconomics. His further work went on to consolidate much of that research effort – whether in his life-cycle hypothesis for the consumption

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Frank Plumpton Ramsey

The Cambridge philosopher Frank Ramsey, A wunderkind of first order, wrote three important contributions to economics. The first, “Truth and Probability” (written in 1926, published 1931), was the first paper to lay out the theory of subjective probability and begin to axiomatize choice under (subjective) uncertainty, a task completed decades later by Bruno de

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Free banking theory (19TH CENTURY)

A liberal approach to banking in the USA adopted by the New York legislature in 1838 and later extended to other states through the National Bank Act, 1863. Free banking theory maintained that the banking system should be open to all and not dependent on legislative approval, provided certain minimum deposit requirements are met.

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Free rider problem

The free rider problem exists when people enjoy the benefits of government provided goods independent of whether they pay for them. In the analyses of economics and political science, free riders are actors who take more than their fair share of the benefits or do not shoulder their fair share of the costs of

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Friedrich August von Hayek

Among the most masterful and insightful of 20th Century economists, Friedrich Hayek alone could have stood shoulder-to-shoulder with his great rival, John Maynard Keynes. Trained by Wieser and Böhm-Bawerk in the Austrian tradition at Vienna, Friedrich A. Hayek nonetheless carved a distinct spot in the economic pantheon – in some ways more different from the

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Fundamental disequilibrium (1945)

The term fundamental disequilibrium was first used by the International Monetary Fund to describe a situation in which a persistent discrepancy exists between the official exchange rate of a currency and its actual purchasing power. When national inflation rates vary, official rates of exchange will no longer mirror the value of a currency and

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Game theory (20TH CENTURY)

Account of politics using the analogy of competitive games. Individuals and institutions pursue their rationally predicted maximum self-interests. They do so in a manner analogous to games players trying to calculate not only their own advantages, but the likely moves of their opponents. The result, paradoxically, is frequently neither the maximum individual nor the

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Gary Becker

Gary Stanley Becker is an American economist. Known for his work at the University of Chicago, he won The Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel in 1992 for “having extended the domain of microeconomic analysis to a wide range of human behavior and interaction, including non-market behavior”. He

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General equilibrium theory (19TH CENTURY- )

First developed by French-born economist Leon Walras (1834-1910), general equilibrium theory studies simultaneous equilibria in a group of related markets. Attributed to Walras, who studied a theoretical economic system in which all consumers were utility maximizers and firms were perfectly competitive, the model shows that a unique stable equilibrium can exist under such conditions. Economists have since

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General strike (20TH CENTURY)

Theory of political action of French writer on syndicalism Georges Sorel (1847-1922). Capitalism would be overthrown by the economic rather than the political actions of the working class. This revolutionary economic activity would be carried out in pursuit of the ultimate ideal of a universal, general strike. But the purpose of advocating such a strike was not

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General theory of employment, interest and money (1936)

The title of a book by English economist John Maynard Keynes (1883-1946), general theory of employment, interest and money represents a major contribution to modern economic thought. It attacked classical economics and put forward important theories on the consumption function, aggregate demand, the multiplier, marginal efficiency of capital, liquidity preference and expectations. Also see: absolute income hypothesis, aggregate demand theory, demand for

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George Arthur Akerlof

George A. Akerlof, an economics professor at the University of California, Berkeley, was named the 2001 co-winner of the Nobel Prize in economic sciences in 2001. It is the second consecutive year in which the Nobel has gone to a UC Berkeley economist. George Akerlof, described by a colleague as ‘a citizen of the

Georges Eugene Sorel

Sometimes incomprehensible spirit behind the French syndicalist movement that sparked in 1895 in an attempt to recapture the initiative away from reformist state socialists and bring the workers’ movement back to its roots in the revolutionary anarcho-socialism of Pierre-Joseph Proudhon and Michael Bakunin that had so shaken the world back in the 1840s and 1850s. Although he claimed himself to

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