- Industry: Economy; Printing & publishing
- Number of terms: 15233
- Number of blossaries: 1
- Company Profile:
One of the most valuable economic assets, hard to create but easy to destroy - a crucial ingredient of a country's social capital. People are more likely to do business together when they trust each other. Trust can reduce market failure that otherwise results from asymmetric information. When there is a lack of trust, people may have to spend heavily on monitoring others' behavior to ensure they do what they say they will do. This cost may be so high that it is not worth going ahead with a business deal. When trust is absent, people may be less flexible in their dealings with each other. Countries can overcome some of the problems of a lack of trust by passing laws requiring good behavior, but only to the extent that people trust that the laws will be enforced. One way in which companies seek to demonstrate that they can trust is by investing heavily in a brand.
Industry:Economy
The number of people of working age without a job is usually expressed as an unemployment rate, a percentage of the workforce. This rate generally rises and falls in step with the business cycle--cyclical unemployment. But some joblessness is not caused by the cycle, being structural unemployment. There are also voluntary unemployment and involuntary unemployment. Some people who are not in work have no interest in getting a job and probably should not be regarded as part of the workforce. Others choose to be out of work briefly while they look for, or are waiting to start, a new job. This is known as frictional unemployment. In the 1950s, the Phillips curve seemed to show that policymakers could reduce unemployment by having higher inflation. Economists now say there is a NAIRU (non-accelerating inflation rate of unemployment). In most markets, prices change to keep supply and demand in equilibrium; in the labor market, wages are often sticky, being slow to fall when demand declines or supply increases. In these situations, unemployment often increases. One way to tackle this may be to boost demand. Another is to increase labor market flexibility.
Industry:Economy
When unemployed people who receive benefits, either from the government or from private charity, are deterred from taking a new job because the reduction or removal of benefit if they do will make them worse off. Also known as the poverty trap, it can be addressed, to an extent, by continuing to pay benefit for a while to unemployed people returning to work. (See welfare to work. )
Industry:Economy
In developed countries, at least, trade union membership and influence has declined over the past three decades. Fewer wages are now set by collective bargaining, and far fewer working days are lost to strikes. Unions, which are in effect a cartel of workers, probably make unemployment higher than it would be without them, as collective bargaining often pushes wages above the level that would bring labor supply and demand into equilibrium. These higher wages increase supply and reduce demand, with the result that there are more jobless people. Unions thus deepen a conflict between those in the labor market who are insiders, that is, union members, and those who are outsiders, typically non-unionized, poorly paid or jobless people. However, unions can combat the excessive market power of some firms, particularly when the firms (or a government) dominate a particular job market. They can support workers who are badly treated by management. They may sometimes provide an efficient, and thus valuable, channel for communication between workers and managers, particularly in countries such as Germany, where conflict between management and unions is viewed as unhealthy.
Industry:Economy
Charging interest, or, at least, an exorbitant rate of interest. Plato and Aristotle reckoned that charging interest was “contrary to the nature of things”; Cato considered it on a par with homicide. For many centuries, the Catholic Church regarded as sinful the charging of any interest by lenders and it was not allowed in Catholic countries, although Jews were exempted, provided they did not charge excessive rates. According to Pope Benedict XIV, in 1745, interest should be regarded as a sin because "the creditor desires more than he has given". In most modern economies, interest is recognized as a crucial part of the economic system, a reward to the lender for the risk taken in making a loan. Even so, most developed countries have some form of usury law imposing limits on how high interest charges can be. These aim to protect borrowers from being exploited by unscrupulous loan sharks.
Industry:Economy
Economist-speak for a good thing; a measure of satisfaction. (See also welfare. ) Underlying most economic theory is the assumption that people do things because doing so gives them utility. People want as much utility as they can get. However, the more they have, the less difference an additional unit of utility will make – there is diminishing marginal utility. Utility is not the same as utilitarianism, a political philosophy based on achieving the greatest happiness of the greatest number. A tricky question is how to measure utility. Money does not (entirely) capture it. You can get richer without becoming more satisfied. So some economists have tried to calculate broader measures of happiness. They have found that people with jobs are much happier than unemployed people. Low inflation also makes people happier. Extra income increases happiness a bit, but not much. In many countries incomes have risen sharply in recent years, but national surveys of subjective well being have stayed flat. Within countries, comparing people across the income distribution, richer does mean happier, but the effect is not large. Married people are often happier than single people; couples without children happier than couples with; women happier than men; white people happier than black people; well-educated people happier than uneducated people; the self-employed happier than employees; and retired people happier than economically active people. Happiness generally decreases until you are in your 30s, and then starts rising again. Other economists are dismissive of such studies. They argue that people are rational maximizers of their own utility, so, by definition, whatever they do maximizes their utility.
Industry:Economy
This usually refers to firms, where it is defined as the value of the firm’s output minus the value of all its inputs purchased from other firms. It is therefore a measure of the profit earned by a particular firm plus the wages it has paid. As a rule, the more value a firm can add to a product, the more successful it will be. In many countries, the main form of indirect taxation is value-added tax, which is levied on the value created at each stage of production. However, it is paid, ultimately, by whoever consumes the finished product. Another definition of value added refers to the change in the overall economic value of a company. This takes into account changes in the combined value of its shares, assets, debt and other liabilities. Part of the pay of company bosses is often linked to how much economic value is added to the company under their management.
Industry:Economy
Value at risk models, widely used for risk management by banks and other financial institutions, use complex computer algorithms to calculate the maximum that the institution could lose in a single day’s trading. These models seem to work well in normal conditions but not, alas, during financial crises, which is arguably when it is most necessary to know how much value is at risk.
Industry:Economy
Part of a firm’s production costs that changes according to how much output it produces. Contrast with fixed costs. Examples include some purchases of raw materials and workers’ overtime payments. In the long run, most costs can be varied.
Industry:Economy
The speed with which money whizzes around the economy, or, put another way, the number of times it changes hands. Technically, it is measured as GNP divided by the money supply (pick your own definition). It is an important ingredient of the quantity theory of money.
Industry:Economy
