Pareto optimality (1906)

Named after Italian sociologist and economist Vilfredo Pareto (1848-1923), Pareto optimality is a situation which exists when economic resources and output have been allocated in such a way that no-one can be made better off without sacrificing the well-being of at least one person. Also see: social welfare function, compensation principle, cost-benefit analysis, scitovsky paradox Source: V Pareto, Manuale d’economia

1 Comments

Partial equilibrium theory (19TH CENTURY- )

Developed by French economist Antoine Augustin Cournot (1801-1877) and English political economist Alfred Marshall (1892-1924), partial equilibrium theory examines the conditions of equilibrium in an individual market or in part of a national economy. Partial equilibrium theory usually looks at the relationship between two economic variables, assuming other variables are constant in value. Also see: general equilibrium theory, classical macroeconomic

2 Comments

Paul A. Baran

Paul Alexander Baran was born in 1910 in Russia. He had his academic career in the United States. He was an economist with Marxist views. He died in 1964. Major Works of Paul Baran – The Political Economy of Underdevelopment, 1952, Manchester School – The Political Economy of Growth, 1957 – The Commitment of

3 Comments

Peak load pricing

Peak-load pricing is a policy of raising prices when the demand for a service is at its highest. The most recent analysis of this pricing policy stems from American research in the 1960s and 1970s. Peak-load pricing is often used by electricity and telephone utilities as a means of reflecting the investment they have

1 Comments

Perfect competition (20TH CENTURY)

Perfect competition is a competitive system in which a large number of firms produce a homogenous product for a large number of buyers. All the firms share the same product/market knowledge and enjoy free entry/exit to and from the industry. They are price-takers and sell as much of the product as possible at the

1 Comments

Permanent income hypothesis (1957)

Developed by American economist Milton Friedman (1912-1992), in its simplest form, permanent income hypothesis states that the choices consumers make regarding their consumption patterns are determined not by current income but by their longer-term income expectations. Measured income and measured consumption contain a permanent (anticipated and planned) element and a transitory (windfall/unexpected) element. Friedman concluded that the individual

1 Comments

Philip Wicksteed

Philip Wicksteed was an English economist closely associated with the Austrian School. Born in 1844 as the son of a Unitarian clergyman, Wicksteed was educated at University College, London and Manchester New College from 1861 to 1867, when he received his master’s degree, with a gold medal in classics. Following his father into the

1 Comments

Physiocracy (18TH CENTURY)

The French school of economics, led by physician and economist Francois Quesnay (1694-1774), whose theory maintained that a natural order existed and it was the duty of the state to preserve this order. The Physiocrats believed that land was the only source of wealth and, therefore, agriculture was the only sector that should be taxed. Industry and commerce

1 Comments

Piero Sraffa

One of the economic giants of the century, Piero Sraffa was at the same time one of the sparest writers of economics – yet each one of his few pieces was tremendous in its turn. Piero Sraffa’s 1926 article on returns to scale and perfect competitions (a revised version of his 1925 Italian paper)

5 Comments

Pigou effect (1943)

Named after English economist Arthur Cecil Pigou (1877-1959), Pigou effect was firmly rooted in the classical school of economics and was subsequently overshadowed by the work of English economist John Maynard Keynes (1883-1946). The term may be defined as the impact of a change in the money supply on consumption. Pigou maintained lower prices would encourage consumption, thereby boosting

1 Comments

Political business cycle (1867)

Initially attributed to German political economist Karl Marx (1818-1883) but later revised by, among others, Polish-born engineer and economist Michal Kalecki (1899-1970); political business cycle attributes economic fluctuations to politicians who manipulate fiscal and monetary policies (choosing between employment or inflation) in order to get elected/re-elected. It is argued that in the period leading up to an election,

1 Comments

Prebisch Singer thesis (1960S)

Named after Argentine economist Raul Prebisch (1901-1986) and German-born British economist Hans Singer (1910- ); Prebisch-Singer thesis asserts that, given the permanent tendency for the terms of trade to go against agricultural products, it is in the interest of developing countries to erect protective tariffs behind which they can industrialize. Source: R Prebisch, The Economic Development of Latin

3 Comments

Price discrimination (20TH CENTURY)

Early analysis of this phenomenon was undertaken by English economist Arthur Cecil Pigou (1877-1959). Price discrimination describes the sale of identical goods or services in different markets at different prices. Pricing is usually linked to ability-to-pay; thus, students or pensioners may pay less than others for social services. On a larger scale, modern pharmaceuticals companies frequently

1 Comments

Privatization (20TH CENTURY)

Explanation and/or justification of shift of functions from government to market. Services are better provided and functions better carried out by market enterprises than by public bodies. At the same time the expectations of citizens are shifted from political solutions – which are collective – to economic ones, which are individual. Also see: nationalization, laissez-faire, physiocracy, mercantilism Source:

3 Comments

Product Development Strategy

Product development strategy – one of growth strategies associated with the Ansoff Matrix refers to the methods and actions used to bring new products to a market or modify existing products to create new business. Developing a product has several steps, from producing an idea of distributing products to customers. Each stage requires a

1 Comments

Product life-cycle theory (20TH CENTURY)

Long-term patterns of international trade are influenced by product innovation and subsequent diffusion. A country that produces technically superior goods will sell these first to its domestic market, then to other technically advanced countries. In time, developing countries will import and later manufacture these goods, by which stage the original innovator will have produced

2 Comments

Property

Account of rights over the material world. Justifications of property rights vary, as do recommendations on the obligations and restraints which should accompany such rights. Disagreement exists as to whether such rights belong in the first place to individuals or to society. Source: David Miller et al., eds, The Blackwell Encyclopaedia of Political Thought (Oxford, 1987)

4 Comments

Property Rights Theory

In the property rights theory, property rights are basic human rights, grounded in current Human Rights law as found in article 17 of The Universal Declaration of Human Rights and theoretical constructs in economics for determining how a resource or economic good is used and owned. This idea of ownership must be constrained from the views of absolute

Public utility pricing (1938)

First raised as an economic issue by American economist Harold Hotelling (1895-1973), public utility pricing refers to the setting of prices for goods and services in order to maximize the benefit to the community. Such pricing for rail, telephone, water and electricity (which could not be carried out in normal market conditions) takes into account future

Purchasing power parity (1916)

With its roots in 17th century mercantilism, purchasing power parity was developed by Swedish economist Karl Gustav Cassel (1866-1945). It asserts that exchange rates are in equilibrium when the domestic purchasing power of currencies are the same. A FFrlO = £1 rate would be in equilibrium if FFrlO bought the same quantity of goods and services in

2 Comments