- Industry: Economy; Printing & publishing
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A poverty trap is "any self-reinforcing mechanism which causes poverty to persist." If it persists from generation to generation, the trap begins to reinforce itself if steps are not taken to break the cycle.
Industry:Economy
The state of being poor, which depends on how you define it. One approach is to use some absolute measure. For instance, the poverty rate refers to the number of households whose income is less than three times what is needed to provide an adequate diet. (Though what constitutes adequate may change over time. ) Another is to measure relative poverty. For instance, the number of people in poverty can be defined as all households with an income of less than, say, half the average household income. Or the (relative) poverty line may be defined as the level of income below which are, say, the poorest 10% of households. In each case, the dividing line between poverty and not-quite poverty is somewhat arbitrary. As countries get richer, the number of people in absolute poverty usually gets smaller. This is not necessarily true of the numbers in relative poverty. The way that relative poverty is defined means that it is always likely to identify a large number of impoverished households. However rich a country becomes, there will always be 10% of households poorer than the rest, even though they may live in mansions and eat caviar (albeit smaller mansions and less caviar than the other 90% of households).
Industry:Economy
Economics that describes the world as it is, rather than trying to change it. The opposite of normative economics, which suggests policies for increasing economic welfare.
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
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
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
A Paris-based club for industrialized countries and the best of the rest. It was formed in 1961, building on the Organization for European Economic Co-operation (OEEC), which had been established under the Marshall plan. By 2003, its membership had risen to 30 countries, from an original 20. Together, OECD countries produce two-thirds of the world’s goods and services. The OECD provides a policy talking shop for governments. It produces forests-worth of documents discussing public policy ideas, as well as detailed empirical analysis. It also publishes reports on the economic performance of individual countries, which usually contain lots of valuable information even if they are rarely very critical of the policies implemented by a member government.
Industry:Economy
