- Industry: Economy; Printing & publishing
- Number of terms: 15233
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At the beginning of the 20th century the population of the world was 1. 7 billion. At the end of that century, it had soared to 6 billion. Recent estimates suggest that it will be nearly 8 billion by 2025 and 9. 3 billion by 2050. Almost all of this increase is forecast to occur in the developing regions of Africa, Asia and Latin America. For what economists have had to say about this, see demographics.
Industry:Economy
On September 22nd 1985, finance ministers from the world's five biggest economies - the United States, Japan, West Germany, France and the UK - announced the Plaza Accord at the eponymous New York hotel. Each country made specific promises on economic policy: the United States pledged to cut the federal deficit, Japan promised a looser monetary policy and a range of financial-sector reforms, and Germany proposed tax cuts. All countries agreed to intervene in currency markets as necessary to get the dollar down. Perhaps not surprisingly, not all the promises were kept (least of all the American one on deficit cutting), but even so the plan turned out to be spectacularly successful. By the end of 1987, the dollar had fallen by 54% against both the D-mark and the yen from its peak in February 1985. This sharp drop led to a new fear: of an uncontrolled dollar plunge. So in 1987 another big international plan, the Louvre Accord, was hatched to stabilize the dollar. Again specific policy pledges were made (the United States to tighten fiscal policy, Japan to loosen monetary policy). Again the participants promised currency intervention if major currencies moved outside an agreed, but unpublished, set of ranges. The dollar promptly rose.
Industry:Economy
Named after Arthur Pigou (1877–1959), a sort of wealth effect resulting from deflation. A fall in the price level increases the real value of people’s savings, making them feel wealthier and thus causing them to spend more. This increase in demand can lead to higher employment.
Industry:Economy
In 1958, an economist from New Zealand, A. W. H. Phillips (1914–75), proposed that there was a trade-off between inflation and unemployment: the lower the unemployment rate, the higher was the rate of inflation. Governments simply had to choose the right balance between the two evils. He drew this conclusion by studying nominal wage rates and jobless rates in the UK between 1861 and 1957, which seemed to show the relationship of unemployment and inflation as a smooth curve. Economies did seem to work like this in the 1950s and 1960s, but then the relationship broke down. Now economists prefer to talk about the NAIRU, the lowest rate of unemployment at which inflation does not accelerate.
Industry:Economy
Over their lives, people try to spread their spending more evenly than their income. The permanent income hypothesis, developed by Milton Friedman, says that a person’s spending decisions are guided by what they think over their lifetime will be their average (also known as permanent) income. A sharp increase in short-term income will not result in an equally sharp increase in short-term consumption. What if somebody unexpectedly comes into money, say by winning the lottery? The permanent income hypothesis suggests that people will save most of any such windfall gains. Reality may be somewhat different. (See life-cycle hypothesis. )
Industry:Economy
The most competitive market imaginable. Perfect competition is rare and may not even exist. It is so competitive that any individual buyer or seller has a negligible impact on the market price. Products are homogeneous. Information is perfect. Everybody is a price taker. Firms earn only normal profit, the bare minimum profit necessary to keep them in business. If firms earn more than that (excess profits) the absence of barriers to entry means that other firms will enter the market and drive the price level down until there are only normal profits to be made. Output will be maximized and price minimized. Contrast with monopolistic competition, oligopoly and, above all, monopoly.
Industry:Economy
Part of the “ile” family that signposts positions on a scale of numbers (see also quartile). The top percentile on, say, the distribution of income, is the richest 1% of the population.
Industry:Economy
A unit of size, a one-hundredth of the total. Not to be confused with percentage change. When something increases by 1 percentage point this may be quite different from a 1% increase. For instance, if GDP grew last year by 1% and this year by 2%, the growth rate this year increased by 1 percentage point compared with last year (the difference between 1% and 2%) and also by 100% (2% is double 1%). A 1% increase would mean that the growth rate this year was only 1. 01%.
Industry:Economy
When capacity is fixed and demand varies during a time period, it may make sense to charge above-average prices when demand peaks. Because this will divert some peak demand to cheaper off-peak periods, it will reduce the total amount of capacity needed at the peak and reduce the amount of capacity lying idle at off-peak times, thus resulting in a more efficient use of resources. Peak pricing is common in services with substantial fixed capacity, such as electricity supply and rail transport, as anybody who pays higher fares to travel during rush hours knows only too well.
Industry:Economy
History matters. Where you have been in the past determines where you are now and where you can go in future. Indeed, even small, apparently trivial, differences in the path you have taken can have huge consequences for where you are and can go. In economics, path dependence refers to the way in which apparently insignificant events and choices can have huge consequences for the development of a market or an economy. Economists disagree over how widespread path dependence is, and whether it is a form of market failure. One focus of this debate is the QWERTY keyboard. Some argue that the QWERTY design was deliberately made slow to use so as to overcome a jamming-at-speed problem in early typewriters. Much faster alternative layouts of keys have failed to prosper, even though the anti-jamming rationale for QWERTY has been defunct for years. Others say that the QWERTY system is as efficient a layout of keys as any other and that its success is a triumph of market forces. Having invested in learning to make and use the QWERTY keyboard, it makes no economic sense to switch to an alternative that is no better than QWERTY.
Industry:Economy
