Capital theory (18TH CENTURY- )

Developed over a period of 250 years by many economists ranging from Adam Smith (1723-1790) to Karl Marx (1818-1883), capital theory analyzes links among the theories of production, growth, value and distribution to explain why capital produces a return that keeps capital intact yet yields interest or a profit which is permanent. Classical economists

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Catallaxy (20TH CENTURY)

A theory of a desirable society, set out by the Austrian economist and political theorist Friedrich Hayek (1899-1992). A catallaxy is a market order without planned ends, characterized by the ‘spontaneous order’ which emerges when individuals pursue their own ends within a framework set by law and tradition. Catallaxy or catallactics is an alternative expression

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Catastrophe theory (20TH CENTURY)

Catastrophe theory has its roots in the work of French mathematician Jules Henri Poincare (1854-1912). A mathematical study of the transition from one state of equilibrium to another and the ensuing instability. The analysis shows how many stable equilibria exist given a choice of control variables but does not show which of them will

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Central place theory (1933)

Developed by the German economic geographer WALTER CHRISTALLER (1894-1975), central place theory studies how cities and towns develop hierarchies of economic activity from the population size and the distance inhabitants are prepared to travel for goods and services. Central place theory is a geographical theory that seeks to explain the number, size and location of human settlements in a residential system. It

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CES production function (1961)

Proposed by the American economist Kenneth Arrow (1921- ), Hollis Chenery (1918- ), BAGICHA S. MINHAS, and Robert Solow (1924- ), CES production function is also known as the constant elasticity of substitution function. Constant elasticity of substitution (CES), in economics, is a property of some production functions and utility functions. Specifically, it arises in a particular type of aggregator function which combines two or

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Charles Tiebout (1924-1968)

Charles Mills Tiebout (1924–1968) was an economist and geographer most known for his development of the Tiebout model, which suggested that there were actually non-political solutions to the free rider problem in local governance. He earned undisputable recognition in the area of local government and fiscal federalism with his widely cited paper “A pure

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Class Struggle

Account of historical change given by German social theorist Karl Marx (1818-1883). The principle division within society is between classes. Classes are groups defined in terms of their relationship to the means of production. They have conflicting interests, and this conflict is the basis of political competition. Class struggle therefore – rather than pursuit of the

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Classical macroeconomic model (18TH-19TH CENTURY)

lassical macroeconomic model is first developed by French economist Jean-Baptiste Say (1767-1832), and later revised by other classical economists. Through the assumptions of factor and product price flexibility, and in the absence of regulations which prevent the market adjustment of demand and supply, full employment equilibrium will be reached in the classical macroeconomic model. Also see: new

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Classical theory of money (17TH-19TH CENTURY)

Money was considered a commodity, the price of which was determined by the amount of time needed to produce it (that is, gold, and silver mining). Classical theory of money was revised by English economist David Ricardo (1772-1823) and the ensuing Bullionist Controversy which paved the way for the Currency School and Banking School of economics

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Coase theorem

Named after the English-born American economist Ronald Harry Coase (1910 – ). Coase theorem asserts that as long as there are well-defined property rights (and no transaction costs), externalities will not cause a breakdown in the allocation of resources. Externalities being defined as the benefits or costs to a society of the process of

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Cobb-Douglas production function (1928)

Developed by American economist PAUL DOUGLAS (1892-1976) and mathematician CHARLES W. COBB. In economics and econometrics, the Cobb–Douglas production function is a particular functional form of the production function, widely used to represent the technological relationship between the amounts of two or more inputs (particularly physical capital and labor) and the amount of output that can be produced by those

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Cobweb theory (1934)

Named by Hungarian-born economist Nicholas Kaldor (1908-1986), cobweb theory stems from a simple dynamic model of cyclical demand which involves time lags between the response of production and a change in price (most often seen in agricultural sectors). Cobweb theory focuses on the process of adjustment in markets by tracing the path of prices and outputs

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Collective bargaining theory (20TH CENTURY)

Collective bargaining theory refers to studies carried out by UK political economist Alfred Marshall (1842-1924) into the negotiation of wage rates and conditions of employment by representatives of the labor force (usually trade union officials) and management. Collective bargaining is a process of negotiation between employers and a group of employees aimed at agreements to regulate working salaries, working

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Collusion theory

Collusion is a secret cooperation or deceitful agreement in order to deceive others, although not necessarily illegal, as is a conspiracy. A secret agreement between two or more parties to limit open competition by deceiving, misleading, or defrauding others of their legal rights, or to obtain an objective forbidden by law typically by defrauding or gaining an unfair market advantage

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Colonialism

Colonialism is the theory of the territorial extension of national power. Colonialism is the policy of a country seeking to extend or retain its authority over other people or territories, generally with the aim of economic dominance. In the process of colonisation, colonisers may impose their religion, economics, and other cultural practices on indigenous peoples. The foreign invaders/interlopers

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Commodity theory of money

Commodity theory of money refers to a system of money based on a specific commodity; that is, any good suitable for exchange or consumption. The system is usually linked to a specific quantity of the commodity whose value is determined by its price in the marketplace. The Gold Standard was a commodity money system.

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Comparative costs (18TH-19TH CENTURY)

A feature of the comparative advantage principle developed by English economists Robert Torrens (1780-1864) and David Ricardo (1772-1823). The law of comparative advantage describes how, under free trade, an agent will produce more of and consume less of a good for which they have a comparative advantage. In an economic model, agents have a comparative advantage over others in producing a particular good if they can produce

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Compensation principle

Compensation principle has its roots in the work of French engineer and economist Jules Dupuit (1804-1866), English political economist Alfred Marshall (1842-1924) and Italian sociologist and economist Vilfredo Pareto (1848-1923). It refers to a transfer mechanism by which total economic welfare is maximized when individuals who gain from a change in the economy compensate

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Theory of Competitive Advantage

Michael Porter proposed the theory of competitive advantage in 1985. The competitive advantage theory suggests that states and businesses should pursue policies that create high-quality goods to sell at high prices in the market. Porter emphasizes productivity growth as the focus of national strategies. This theory rests on the notion that cheap labor is

Composite commodity (1939)

Developed by English economist John Hicks (1909-1989), composite commodity describes a group of goods whose relative prices do not vary and can thus be treated as one commodity. Purpose Consumer demand theory shows how the composite may be treated as if it were only a single good as to properties hypothesized about demand. The composite

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