Thomas Malthus

Ideas – Population, when unchecked, increases in a geometric ratio, while subsistence increases only in arithmetic ratio. – Accordingly, there is a strong and constantly operating check on population because of the difficulty of subsistence. – The price of food will tend to increase, owing to the necessity of employing additional land of inferior

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Tiebout hypothesis (1956)

Tiebout Hypothesis is named after American economist Charles Tiebout (1924-1968), who proposed that if public goods/services were provided by a large number of local governments, consumers would have a greater diversity of choice. Also see: social welfare function Source: C Tiebout, ‘A Pure Theory of Local Government Expenditure’, Journal of Political Economy, vol. LXIV (1956), 416-24 Overview

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Time preference theory of interest (1871)

Developed first by Austrian economist CARL MENGER (1840-1921), time preference theory of interest is the analysis of how individuals or firms will sacrifice present utility in the hope of greater future returns. The expected rate of return is highly subjective. Also see: term structure of interest rates, random walk hypothesis Source: C Menger, Principles of Economics,

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Transaction Cost Economics

In transaction cost economics and related disciplines, a transaction cost is a cost incurred in making an economic exchange. A number of different kinds of transaction costs exist. Search and information costs are costs such as those incurred in determining that the required good is available on the market, who has the lowest price,

Trade cycle

First observed by the English economist Sir William Petty (1623-1687), trade cycle is defined as the existence of fluctuations in national income over a variable timespan. Government policy is used to dampen the magnitude of the fluctuations in order to maintain stability in the economy. Petty’s findings were later developed by English economists THOMAS MALTHUS (1766-1834) and John Stuart

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Trickle down theory

A theory of economic development that claims higher standards of living for the poor will develop gradually and not at the overt expense of the more affluent. Also see: dual economy theory “Trickle-down theory” can refer to two different but related concepts: Trickle-down effect, a model of product adoption in marketing Trickle-down economics, a theory

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Turnpike theory (1958)

Named by the American economists ROBERT DORFMAN (1916-2002), Paul Samuelson (1915- ) and Robert Solow (1924- ); turnpike theory asserts that it is sometimes better to adopt a maximum or near maximum possibility balanced growth-path to allow an economy to move to a more satisfactory state quickly, even if consumption is lower in the interim than at the

Uncertainty

The element of risk that is unpredictable and has no measurable probability. Profit is usually regarded as the reward a company earns for enduring uncertainty in business activity. Also see: bounded rationality Source: K H Borch, The Economics of Uncertainty (Princeton, N.J., 1968) Although the terms are used in various ways among the general public,

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Underconsumption theory (20TH CENTURY)

Analysis of how total output fails to be sold at the cost of production plus normal profit. Such insufficient consumption within a depressed economy aggravates the economic decline of the state. A further theory suggests that when there is inadequate buying power in an economy, the government should give periodic injections of money to consumers.

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Unemployment

The underutilization of labor in the creation of wealth. Unemployment can take many forms (such as voluntary, involuntary, frictional, structural or demand deficient) and it can be measured both as a stock and a flow. Classical economists saw unemployment as a temporary phenomenon until price flexibility restored an economy to full employment. Later theorists,

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Utilitarianism – Chapter 1: General Remarks

by John Stuart Mill There are few circumstances among those which make up the present condition of human knowledge, more unlike what might have been expected, or more significant of the backward state in which speculation on the most important subjects still lingers, than the little progress which has been made in the decision

Utilitarianism – Chapter 2: What Utilitarianism Is

by John Stuart Mill A passing remark is all that needs be given to the ignorant blunder of supposing that those who stand up for utility as the test of right and wrong, use the term in that restricted and merely colloquial sense in which utility is opposed to pleasure. An apology is due

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Utilitarianism – Chapter 3: Of the Ultimate Sanction of the Principle of Utility

by John Stuart Mill The question is often asked, and properly so, in regard to any supposed moral standard — What is its sanction? what are the motives to obey it? or more specifically, what is the source of its obligation? whence does it derive its binding force? It is a necessary part of

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Utilitarianism – Chapter 4: Of What Sort of Proof the Principle of Utility is Susceptible

by John Stuart Mill It has already been remarked, that questions of ultimate ends do not admit of proof, in the ordinary acceptation of the term. To be incapable of proof by reasoning is common to all first principles; to the first premises of our knowledge, as well as to those of our conduct.

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Utilitarianism – Chapter 5: The Connection Between Justice and Utility

by John Stuart Mill In all ages of speculation, one of the strongest obstacles to the reception of the doctrine that Utility or Happiness is the criterion of right and wrong, has been drawn from the idea of justice. The powerful sentiment, and apparently clear perception, which that word recalls with a rapidity and

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Verdoorn’s law (1948)

Named after Dutch economist PETRUS JOHANNES VERDOORN, Verdoorn’s law relates to the long-term dynamic relationship between the rate of growth in output and the growth of productivity due to increasing returns. Source: P J Verdoorn, ‘Verdoorn’s Law in Retrospect: A Comment’, Economic Journal, vol. xc (June, 1980), 382-85 Verdoorn’s law is named after Dutch economist

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Vent for surplus (18TH, 20TH CENTURIES)

Originally formulated by Scottish economist Adam Smith (1723-1790), vent for surplus is an explanation of why nations export goods, thereby creating international trade. Domestic economies often are too small to absorb all the output of their markets, thus generating a surplus. Vent for surplus theory has been developed by Burmese-born British economist HLA MYINT (1920- )

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Theory of the Visible Hand

The theory of the visible hand of Alfred D. Chandler determined that it was not the invisible hand of the market that determined corporate effectiveness but the visible hand of management. His book, “The Visible Hand: The Managerial Revolution in American Business,” which won both the Pulitzer and Bancroft prizes in 1978, rewrote the

VRIN model or VRIO framework of Sustained Competitive Advantage of the Firm

We review the main contents of the VRIN model or VRIO framework, developed from the research of Barney, published in Journal of Management in 1991. This framework focuses on the attributes of resources that allow firm generating its sustainable competitive advantage. Four attributes of such resources include value, rareness, imitability, and non-substitutability or so-called

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Vilfredo Pareto

The Italian economist Vilfredo Pareto was one of the leaders of the Lausanne School and an illustrious member of the ‘second generation’ of the neo-classical revolution. Although only mildly influential during his lifetime, his “tastes-and-obstacles” approach to general equilibrium theory were resurrected during the great ‘Paretian Revival’ of the 1930s and have guided much of economics

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