- Industry: Economy; Printing & publishing
- Number of terms: 15233
- Number of blossaries: 1
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In 1899 the commissioner of the American Office of Patents recommended that his office be abolished because “everything that can be invented has been invented”. The fact that there has been so much innovation during the subsequent 100 years may owe something to the existence of patents. Economists reckon that if people are going to spend the time and money needed to think up and develop new products, they need to be fairly confident that if the idea works they will earn a decent profit. Patents help achieve this by granting the inventor a temporary monopoly over the idea, to stop it being stolen by imitators who have not borne any of the development risk and costs. Like any monopoly, patents create inefficiency because of the lack of competition to produce and sell the product. So economists debate how long patent protection should last. There is also debate about which sorts of innovation require the encouragement of a potential monopoly to make them happen. Furthermore, the pace of innovation in some industries has sharply reduced the number of years during which a patent is valuable. Some economists say that this shows that patents do not play a large part in the process of innovation.
Industry:Economy
The name given to the arrangements through which countries reschedule their official debt; that is, money borrowed from other governments rather than banks or private firms. The club is based on Avenue Kléber in Paris. Its members are the 19 founders of the OECD as well as Russia. Other institutions such as the World Bank attend in an informal role. Rescheduling requires the consensus agreement of members and must not favor one creditor nation over another. Private debt re¬scheduling takes place through the London Club.
Industry:Economy
A situation in which nobody can be made better off without making somebody else worse off. Named after Vilfredo Pareto (1843–1923), an Italian economist. If an economy’s resources are being used inefficiently, it ought to be possible to make somebody better off without anybody else becoming worse off. In reality, change often produces losers as well as winners. Pareto efficiency does not help judge whether this sort of change is economically good or bad.
Industry:Economy
The common tendency of prices in financial markets initially to move further than would seem strictly necessary in response to changes in the fundamentals that should, in theory, determine value. One reason may be that in the absence of perfect information, investors move in herds, rushing in and out of markets on rumor. Eventually, as investors become better informed, the price usually returns to a more appropriate level. Overshooting is especially common during significant realignments of exchange rates, but there are plenty of other examples. For instance, following the abolition of capital controls by some developing countries, the prices of equities in those countries initially soared to what proved to be unjustified levels as foreign capital rushed in, before settling in the longer-term at more sustainable valuations.
Industry:Economy
When an economy is growing too fast and its productive capacity cannot keep up with demand. It often boils over into inflation.
Industry:Economy
In the case of drugs, those that can be purchased without a prescription from a doctor. In the case of financial securities, those that are bought or sold through a private dealer or bank rather than on a financial exchange.
Industry:Economy
Shifting activities that used to be done inside a firm to an outside company, which can do them more cost-effectively. Big firms have outsourced a growing amount of their business since the early 1990s, including increasingly offshoring work to cheaper employees at firms in countries such as India. This has become politically controversial in countries that lose jobs as a result of offshoring. However, a firm that outsources can improve its efficiency by focusing on those activities in which it can create the most value; the firm to which it outsources can also increase efficiency by specializing in that activity. That, at least, is the theory. In practice, managing the outsourcing process can be tricky, particularly for more complex activities.
Industry:Economy
How far an economy’s current output is below what it would be at full capacity. On average, inflation rises when output is above potential and falls when output is below potential. However, in the short run, the relationship between inflation and the output gap can deviate from the longer-term pattern and can thus be misleading. Alas for policymakers – because nobody really knows what an economy’s potential output is, the size and even the direction of the output gap can easily be misdiagnosed, which can contribute to serious errors in macroeconomic policy.
Industry:Economy
The fruit of economic activity: whatever is produced by using the factors of production.
Industry:Economy
A cartel set up in 1960 that wrought havoc in industrialized countries during the 1970s and early 1980s by forcing up oil prices (which quadrupled in a few weeks during 1973–74 alone), resulting in high inflation and slow growth. A lot of productive capital equipment that had been viable at lower oil prices proved to be unprofitable to run at the higher prices and was shut down. Some economists reckon that market forces would have driven up oil prices anyway and that OPEC merely capitalized on the opportunity. Since the early 1980s, OPEC's influence has waned. Many firms have switched to production methods that need less oil, or less energy altogether. Non-OPEC producers such as the UK have brought new oil fields on stream. And some individual members of the cartel have broken ranks by failing to restrict their oil production, resulting in lower oil prices.
Industry:Economy
