References Rotwein, E. (ed.) (1955) David Hume: Writings on Economics, London: Nel- son. Humphrey–Hawkins Act 1978 (E6) US federal statute, formally known as the Full Employment and Balanced Growth Act, which extended the EMPLOYMENT ACT 1946 by stating the priorities for the economic goals set for the US president. It also established procedures to improve the co-ordination between the president, Congress and the Federal Reserve System with the hope of improving the formula- tion of economic policy. Hunt Commission (G2, K2) The body which investigated the US secu- rities industry. It recommended more free- dom for financial firms to respond to new technology and the emergence of new types of financial firm. Seealso:BigBang;Mayday References Report of the President’s Commission on Financial Structure and Regulation,Wa- shington, DC: US Government Printing Office, 1971. hurdle rate of return (M2) The minimum rate of return to an invest- ment project to justify it being undertaken. hybrid auction (D4) A method of selling government bonds used in Japan. Most of an issue is allo- cated conventionally through a syndicate but the remainder is auctioned. Bidders make a quantity bid, rather than a price bid, committing themselves to taking a certain amount of an issue. The price will be fixed by the subsequent price nego- tiated by the syndicate. Seealso:auction hybrid income tax (H2) A combination of a comprehensive INCOME TAX and an EXPENDITURE TAX. It was gradu- ally introduced in Japan to encourage savings, e.g. in the form of tax-exempt savings and flat rate capital gains tax. Seealso:doubletaxationofsavings hyperinflation (E3) A rise in product prices of more than 50 per cent per month. In extreme cases, prices can double in one day. The best known examples have been Germany in 1923, Hungary in 1946 and some Latin American countries in the 1980s. Germa- ny’s inflation rose from a mark valued in the summer of 1914 at 4.2 to the US dollar to 4,200,000,000,000 on 15 November 1923. This type of inflation forces people to abandon the use of money in favour of BARTER and INDEXATION. SAVING is discour- aged and fixed income groups with little bargaining power, including the RENTIER class, suffer a massive fall in income. Governments, finding it difficult to collect taxes, often resort to increasing the money supply as a source of income in such circumstances. References Siklos, R.K. (1990) War Finance, Hyperin- flation and Stabilization in Hungary 1938–48, London and New York: Mac- millan and St Martin’s Press. hypothecation (G1, H2) 1 Pledging a security without delivering it. 2 Relating a particular tax revenue to a particular public expenditure. Seealso:dedicatedbudget;earmarking; mortgage;ringfencing hysteresis (J6) The hypothesis, applied to the study of UNEMPLOYMENT, which states that a level of unemployment does not have a tendency to return to an equilibrium rate and certainly not the NATURAL RATE OF UNEM- PLOYMENT . (Originally a term used by James Ewing in the 1880s to describe the proper- ties of ferric metals.) In the UK, hysteresis has been used as an explanation of persist- ing unemployment throughout the 1980s. It has been noted that when an economy expands, the increased demand leads to © 2002 Donald Rutherford higher wages for workers at present em- ployed rather than to employment for the jobless. Also, a long duration of unem- ployment de-skills workers, making it less likely that they will be re-employed. References Cross, R. (1988) Unemployment, Hyster- esis and the Natural Rate Hypothesis, Oxford: Basil Blackwell. © 2002 Donald Rutherford I ideal limit (R1) The maximum distance a consumer will travel to purchase goods. Seealso:centralplacetheory identification problem (C1) The ECONOMETRIC problem of discovering from data which equation is being esti- mated. A major example of this is the problem of separating demand from supply curves when attempting to construct a demand curve from raw data. If, over a period of time, there are shifts in a demand curve, different observations A, B, C and D will be on different demand curves X 1 X 1 – X 4 X 4 and so a supply curve (line YY) rather than a demand curve has been identified. As this problem arises because the CETERIS PARIBUS conditions do not hold, only by collecting data on such back- ground variables is it possible to identify a demand curve. identity theft (K4) Stealing the identity of a creditworthy person in order to acquire credit fraudu- lently. Ifo Business Climate Index (E6) A monthly index published by the Ifo- Institute for Economic Research, Munich, which surveys 7,000 businesses to appraise the business situation as good, satisfactory or poor and to ascertain whether business expectations for the next six months are the same, better or worse. There are separate indexes for West Germany and East Germany calculated as the geometric mean of survey results. ill-being (D6) A state of deprivation evident in low income, poor health and few opportunities for betterment. The opposite of WELL- BEING . References Srinivasan, T.N. (1994) ‘Destitution: a discourse’, Journal of Economic Litera- ture 32: 1842–55. illiquid (G1) The state of an asset inconvertible into cash. illth (D6) Goods and services giving negative satis- faction; the opposite of wealth. Many © 2002 Donald Rutherford goodscanberegardedasbothwealthand illth,e.g.tobacco.AtermcoinedbyJohn Ruskininthenineteenthcentury. Seealso:bad;wealth References Ruskin,J.(1985)UntothisLast,essay4, London:Penguin;NewYork:Viking Penguin. immigration(F2,J1) Thepermanentsettlingofpeoplefrom othercountries.Immigrantstakeupa newresidencetoescapethepovertyor persecutionoftheiroriginalcountries,to increasetheirpersonaland ECONOMICWEL- FARE inanewcountryortojoinrelatives whohavealreadymigrated.Theeffectsof immigrationonacountryinclude,atthe macrolevel,impactsoninflation,technical progressandpublicexpenditureand,at themicrolevel,achangeinthepatternof demandforgoodsandservicesandextra laboursupplytoparticularlabourmar- kets.Immigrantsareabsorbedintoan economyindifferentways:as ENTREPRE- NEURS ,asmembersoftheSECONDARYLA- BOURMARKET orintoenclaves. Seealso:enclaveeconomy;migration References Piore,M.I.(1979)BirdsofPassage:Mi- grantLaborandIndustrialSocieties, NewYork:CambridgeUniversityPress. immiseration(P1) Theincreasingpovertyoftheworking classunder CAPITALISM.MARXdidnot equatethissimplywithafallinrealwages asimmiserationhasalsopsychological andspiritualdimensions. Seealso:alienation;divisionoflabour References Plamenatz,J.(1975)KarlMarx’sPhiloso- phyofMan,Oxford:ClarendonPress. immiserizinggrowth(O4) Adeclineinthe ECONOMICWELFAREofa country,despiteanexpansionofitspro- ductionandexports,broughtaboutbya deteriorationinits TERMSOFTRADE. References Bhagwati,J.N.(1958)‘Immiserizinggrowth: ageometricalnote’,ReviewofEconomic Studies25:201–5. Johnson,H.G.(1967)‘Thepossibilityof incomelossesfromincreasedefficiency orfactoraccumulationinthepresence oftariffs’,EconomicJournal77:151–4. impactmultiplier(E0) Theimpactonanationaleconomyina givenyearofthe EXOGENOUSVARIABLESfor thatyearandthe ENDOGENOUSVARIABLESfor prioryears. References Goldberger,A.S.(1959)ImpactMultipliers andtheDynamicPropertiesoftheKlein- GoldbergerModel,Amsterdam:North- Holland. imperfectcompetition(L1) Thestateofamarket,similarto MONOPOLIS- TICCOMPETITION ,firstidentifiedbyJoanRO- BINSON .Thetermisalsousedinthebroad sensetorefertoallmarketswithoutallthe characteristicsof PERFECTCOMPETITION. References Robinson,J.(1933)TheEconomicsofIm- perfectCompetition,London:Macmillan. imperialism(P1)seecapitalist imperialism implementation lag (E6) The time it takes to institute a discretion- ary change in policy. These lags are usually shorter for MONETARY POLICY than for FISCAL POLICY as in the former case a sudden announcement of a change in interest rates can be made, whereas fiscal changes often need legislation. Seealso:recognitionlag implicit contract theory (J4) A labour market theory which asserts that labour contracts can be successfully based on EXPECTATIONS, e.g. of promotion or stable employment, instead of on legally binding terms. The theory recognizes that © 2002 Donald Rutherford in many employment relationships there is a deficiency of information. Typically, an employment contract is incomplete be- cause it omits reference to work effort and so an employer has to monitor the contract to achieve the exchange of a ‘fair day’s pay’ for a ‘fair day’s work’. However, it has been argued that some contracts are more explicit than originally thought, as evidenced by union resistance to unfavour- able revisions of them. Implicit contract- ing explains short-term temporary unemployment. The theory assumes that wages are sticky and that employees will accept such contracts because of their aversion to risk. References Akerlof, G.A. and Miyazaki, H. (1980) ‘The implicit contract theory of unem- ployment meets the wage bill argument’, Review of Economic Studies 47: 321–38. Okun, A.M. (1981) Prices and Quantities, Washington, DC: Brookings Institution. Rosen, S. (1985) ‘Implicit contracts: a survey’, Journal of Economic Literature 23: 1144–75. implicit cost (D0, M2) A cost of production which is not included in the accounts of a business but never- theless is incurred. This often happens when firms are owned by sole proprietors who underestimate the cost of their la- bour. Seealso:explicitcost implicit marginal income (H2) The size of the fall in the amount of a subsidy when income rises. This typically occurs when welfare benefits are stopped because income has reached a threshold level. Seealso:povertytrap implicit price deflator (E3) The ratio of the GROSS NATIONAL INCOME at current prices to the gross national pro- duct at constant prices  100. This defla- tor is produced as a by-product of NATIONAL INCOME accounting. implied price index (C1, E3) see implicit price deflator import (F1) The purchase of a good or a service that has been produced by another country. Exports net of imports are included in a country’s GROSS DOMESTIC PRODUCT.AnECON- OMY at the beginning of an expansionary phase will often increase its imports of raw materials and semi-finished goods. An OPEN ECONOMY will have a high volume of imports: the smaller or more specialized an economy is, the more it will have to import to satisfy consumers’ demand for a wide range of goods and services. Seealso:export;inter-industrytrade;in- tra-industrytrade;marginalpropensityto import import penetration ratio (E2, F1) The ratio of imports to domestic con- sumption for a class of goods of a particular country. This measure reflects non-tariff trade restrictions at a particular time but does not separate these effects from other reasons for importation (e.g. a lack of domestic product substitutes) and is not adjusted for overvaluation or under- valuation of a currency. import substitution (F4, O2) A development policy encouraging domes- tic production. This is achieved in various ways including the imposition of TARIFFS to keep out foreign-produced goods and the reduction in the prices of home-pro- duced goods through subsidization or a change in their quality. Seealso:infantindustry impossibility theorem (D7) Arrow’s assertion that under democracy majority choice produces a stalemate, as an unambiguous social choice cannot be achieved if there are more than two options facing voters. Assume individuals A, B and C and options x, y and z. A prefers x to y and y to z; B prefers y to z and z to x; C prefers z to x and x to y. Each option is thus ranked first by one of © 2002 Donald Rutherford the three individuals, second by another. Since there is no overall favourite, there is a stalemate. References Arrow, K.J. (1966) Social Choice and Individual Values, 2nd edn, New York: Wiley. impost (H2) A tax or duty. impulse response function (C6) An equation or graph indicating the re- sponse of a system to a shock, e.g. changes in output or consumption resulting from an increase in the stock of money. impurepublicgood(H4)seemixedgood imputed income (D3, H2) The benefit received from a service not measured by a monetary transaction. Some forms of this income are estimated to obtain a fuller measure of the GROSS NATIONAL PRODUCT . In the USA, national income accounting imputes an income to food grown and consumed by farmers. Also, to raise more revenue from an income tax the imputed income from owner-occupied houses can be added to income actually received by taxpayers. in-bond manufacturing (L6) The manufacturing of duty-free imported raw materials that are processed and assembled for re-export. In some cases, the VALUE-ADDED TAX of the country ulti- mately purchasing them is levied. This arrangement between Mexico and the USA has flourished since the 1960s. Seealso:freeport incentive compatible (D0) A state of affairs under which an indivi- dual has no incentive to change, e.g. under PERFECT COMPETITION when a buyer or seller accepts market determination of prices and cannot benefit by attempting to influ- ence them. incentive contract (H5) A type of contract often made between governmental bodies and private firms which consists of a fixed part (which is a function of the expected cost) and another part (which is proportional to the differ- ence between the expected cost and the actual ex post cost). A private contractor has the greatest incentive to keep costs down if he or she expects to lose most of the difference between the ex ante and ex post costs. Seealso:exante,expost incentive effect (H2) The encouraging effect of a tax on the supply of an activity, especially work. A progressive income tax can have incentive effects if individuals want to achieve a target post-tax income and can only do this by working harder in the face of steep tax progression. Seealso:disincentiveeffect;impactmulti- plier;progressivetax incentive pay scheme (J3) A wage or salary system that relates all or part of employment earnings to the output of a worker. Manual (blue-collar) workers have often had the opportunity to partici- pate in PRODUCTIVITY schemes, including being paid by the number of ‘pieces’ produced rather than by the amount of time supplied. Many sales staff have a high proportion of their pay in the form of commission. Managerial staff in many organizations are offered a profit-sharing scheme. Workers are most likely to in- crease their productivity when a new scheme is introduced – hence the sugges- tion that incentive schemes should be periodically replaced. incidence(H2)seetaxincidence income (D0, E0) The flow of value, expressed in money or in goods and services, accruing to a government, a firm or an individual over a specified time period. Seealso:Haig–Simonsdefinitionofin- come;Hicksianincomemeasure;money © 2002 Donald Rutherford income;psychicincome;realincome; stockandflowconcepts;wealth References Parker, R.H., Harcourt, G.C. and Whit- tington, G. (eds) (1986) Readings in the Concept and Measurement of Income, 2nd edn, Oxford: Philip Allan. income and substitution effects (D0) The effects of a price change. The income effect occurs because a fall in price raises real income (or lowers it if the price rises); the substitution effect encourages more consumption of the good which has be- come relatively cheaper (the opposite if the price has increased). Thus, in the figure, when the price of good B falls, this consumer moves from combination x to combination y and chooses OQ of B instead of combination OP. An extra BUD- GET LINE is inserted to separate the price effect into income and substitution effects and another combination z is discovered. The price effect is the movement x to y (PQ on the horizontal axis); the income effect is the movement from z to y (RQ on the horizontal axis). The substitution ef- fect is the movement from x to z (PR on the horizontal axis). These effects are analysed in the study of consumer behaviour to determine the effect of a price change on quantity demanded, in the study of TAX INCIDENCE as prices are affected and in the study of LABOUR SUPPLY to discover the particular TRADE-OFF between work and leisure cho- sen by a worker. Seealso:Slutskyeffect;Slutskyequation income–consumption curve (D0) A graphical representation of the relation- ship between changing amounts of con- sumption of alternative goods as real income changes, using INDIFFERENCE CURVES and BUDGET LINES. The parallel budget lines show real income increases as one moves away from the origin. The income–con- sumption curve joins together the points of tangency between indifference curves I 1 , I 2 ,I 3 and I 4 and budget lines representing different income levels. The curve can be used to demonstrate which of two goods is the INFERIOR GOOD. Seealso:Engel’slaw;price–consumption curve income differential (D3, J3) The ratio of the average income of one group of persons to another. Persons can © 2002 Donald Rutherford be grouped according to occupation, loca- tion, industry or type of income giving rise to occupational, industrial and regional wage differentials in the labour market. In capitalist societies, differences between employment and investment incomes are also of concern to researchers. In idealistic societies, there is an aversion to large differentials as EGALITARIANISM is often a major goal, e.g. PLATO believed that the richest member of society should not be more than four times better off than the poorest member of society. Seealso:wagedifferentials income distribution (D3) A classification of personal incomes ac- cording to the FACTOR OF PRODUCTION (land, labour or capital) that has produced it, or according to its size. income drawdown scheme (J3) Taking income from a pension fund in- stead of buying an annuity. income elasticity of demand (D0) The ratio of the percentage increase in demand for a good or service to a percen- tage increase in income. Thus, if an increase in income of 4 per cent is asso- ciated with an increase in demand for food of 2 per cent, the income elasticity will be 0.5. Income elasticities for foodstuffs and agricultural raw materials are often less than one, with the consequence that the divergence in economic prosperity between primary producing countries and indus- trialized countries increases in periods of world economic growth. Income elastici- ties are positive for NORMAL GOODS and negative for INFERIOR GOODS. In the figure, A is a luxury good as more of it is demanded at higher incomes, B is a normal good and C is an inferior good as less of it is demanded at higher incomes. Seealso:Engel’slaw;priceelasticityof demand income multiple (G2) The amount of a loan divided by the borrower’s annual income. In times of inflation multiples rise helping to sustain rising property prices. UK house loans as a multiple of incomes were on average 1.67 in 1980 and rose to 6.0 in 2000. income–offer curve (D0) Another name for the INCOME–CONSUMPTION CURVE . income-splitting system (H2) A method of taxing the income of married couples. The aggregated income of the couple is halved and then the income tax is levied on each half. The couple pay double the amount on the notional equal incomes. There are several variants of this system. incomes policy (E6) A macroeconomic policy directly control- ling factor incomes. Many Western coun- tries since 1945 have used it as an alternative to FISCAL and MONETARY POLICIES with the hope that, by controlling wage fixing in the labour market, the rate of increase of product prices would be re- duced. The most extreme form is a wages freeze, e.g. the UK’s in 1966. Milder forms include setting a norm for wage increases in line with the rise in PRODUCTIVITY, allow- ing for exceptional increases (e.g. to help low-paid workers, to alleviate a labour shortage or to preserve comparable pay for different occupational groups), or an © 2002 Donald Rutherford exhortation to pay smaller increases ( MORAL SUASION). Many countries, including the UK and the USA, have only used incomes policies intermittently, but the Netherlands is ex- ceptional in achieving the implementation of a long-term policy from 1948 to the 1960s. Some incomes policies have in- cluded restrictions on increases in com- pany dividends in order to restrain all types of personal incomes: however, this approach has produced distortions in ca- pital markets. There were many US experiments in incomes policies in the period 1962–71, some of them inspiring the shape of UK incomes policies. In January 1962 the US COUNCIL OF ECONOMIC ADVISERS published Guideposts for Non-inflationary Wage and Price Behavior in which the trend in productivity was used as the general guidepost for non-inflationary wage settle- ments. Specific guideposts were abandoned in 1967 but in 1970 a National Commis- sion on Productivity was set up; inflation alerts were published when there were significant wage and price increases. In 1971 there was a ninety-day wage–price freeze: its sequel was the setting up of a tripartite Pay Board and a Price Commis- sion. The effectiveness of this policy has long been debated: it is difficult to estab- lish that the guideposts reduced wage inflation. The UK had statutory incomes policies for the periods 1966–70 and 1972–74, compulsory policies 1975–7 and voluntary policies 1948–50, 1961–2 and 1977–9. There was a tendency to impose an in- comes policy in a crisis in the most severe form – a wage freeze for up to one year – and then to relax the policy by permitting exceptions to the principle that wage increases should be in line with general productivity increases. An innovation of the 1970s was to choose as a wage norm a flat rate cash increase; this helped the lower paid but reduced wage differentials, opening the door to a flood of subsequent wage claims. Some observers of incomes policies are more sympathetic towards them. ROSTOW, for example, has noted that in 1984 Japan, West Germany and Switzerland were able by means of incomes policies to have lower prime interest rates, lower unem- ployment, lower inflation and large bal- ance of payments surpluses. In sum, to be successful an incomes policy should pro- vide more helpful economic and financial information and education in its use to wage bargainers, as well as an element of real wage increases. Seealso:collectivebargaining References Claudon, M.P. and Cornwall, R.R. An Incomes Policy for the United States: New Approaches, Boston: Nijhoff. Holden, K., Peel, D.A. and Tompson, L.L. (1987) The Economics of Wage Control, Basingstoke: Macmillan. Urquidi, V.L. (ed.) (1989) Incomes Policies, Basingstoke: Macmillan. incomestatement(M4)seeprofitand lossaccount income support (H2) A welfare payment in cash. This alterna- tive to in-kind benefits gives welfare reci- pients more freedom in their spending. income tax (H2) A tax levied on taxable income. It is a complex tax because of different rates for different types of income, exemption of some types of income (particularly fringe benefits) and allowances/deductions for various categories of expenditure (e.g. expenses related to employment, charitable covenants). It was first used in England in 1435, 1450 and 1798–1805 to finance the Napoleonic Wars; from 1842, it has been a permanent feature of the UK tax system. In the USA it was used to finance the Civil War in 1861–72 but an attempt to reintroduce it in 1894 failed as it was declared unconstitutional, making neces- sary the 16th Amendment to the US Constitution in 1913 to legitimize it. The © 2002 Donald Rutherford principal theoretical justification advanced for the tax is the SACRIFICE THEORY. In all countries, income tax is invariably paid on employment income, dividends, net business income, income from immo- vable property and the income of farmers and small traders. Sometimes it is paid on some types of fringe benefit, IMPUTED IN- COME from home ownership, pensions, unemployment benefit and sickness bene- fits. Seealso:directandindirecttaxation;tax evasion References Atkinson, A.B. (1995) Public economics in action: the basic income/flat tax propo- sal, Oxford and New York: Oxford University Press. income terms of trade (F1) A measure of the purchasing power of exports in terms of imports. The formula used for calculating it is I ¼ P x P m ÂQ x where Q x is the volume of exports (I is income, P is price, Q is quantity, x is exports and m is imports). This is a more useful indication of the effect of interna- tional trade on a country’s national econ- omy than the NET BARTER TERMS OF TRADE because income terms take into account both the prices and volumes of trade but net barter terms ignore volume changes. Seealso:termsoftrade incomplete contract (D0, K0) An agreement with insufficient clauses to anticipate all possible relationships be- tween the contracting parties. To over- come the shortage of contingency clauses residual rights are often assigned to one of the parties. References Hart, O. and Moore, J. (1999) ‘Founda- tions of incomplete contracts’, Review of Economic Studies 66: 115–38. incomplete market (D4, G1) A real or financial market with an incom- plete structure. Difficulties arise from the conflicting objectives of firms, time and uncertainty. A common example of such markets is an insurance market in which not all individuals are insured against the risk of losing income. References Hart, O. (1975) ‘On the optimality of equilibrium when the market structure is incomplete’, Journal of Economic Theory 11: 418–43. increasing opportunity costs law (D2) The TRADE-OFF between an increasing amount of one good and an increasing amount of another in an economy with FULL EMPLOYMENT. The opportunity cost of having more of one good is the increasing cost of losing quantities of the other good. This is the principle underlying a PRODUC- TION POSSIBILITY FRONTIER . increasing returns to scale (D2) An increase in output at a faster rate than the increase in factor inputs. From SMITH onwards, theorists of ECONOMIC GROWTH have been interested in investigating the circumstances in which there can be in- creasing returns to particular industries or a national economy as a whole. CLASSICAL ECONOMISTS asserted that agriculture was subject to diminishing returns and increas- ing returns were only possible in manufac- turing. Seealso:Kaldor’slaws;returnstoscale; Verdoorn’slaw References Young, A. (1928) ‘Increasing returns and economic progress’, Economic Journal 38: 527–42. incremental capital–output ratio (E0) The extra amount of capital needed to produce one more unit of output. In the simplest of ACCELERATOR models, the accel- erator coefficient is equivalent to the incremental capital–output ratio. Changes in efficiency, rather than in technology, © 2002 Donald Rutherford [...]... organization (L0) Also known as industrial economics, this applied branch of microeconomics was partly founded to provide theoretical support for the analysis of ANTITRUST but now includes the examination of all the functions of management A major aspect of © 2002 Donald Rutherford the subject is the study of market structures and an examination of the implications of those structures for pricing, investment... in his Economics of Industry and Principles of Economics (Book IV) See also: structure–conduct–performance model; theory of the firm References Mason, E.S (1 957 ) Economic Concentration and the Monopoly Problem, Cambridge, MA: Harvard University Press Stigler, G.J (1968) The Organization of Industry, Homewood, IL: Richard D Irwin industrial policy (L5) Measures attempting to speed the process of resource... international comparisons in the form of travellers’ accounts of foreign countries were often used by economists, e.g PETTY, SMITH and MALTHUS international comparisons of the cost of living (D6, F0) The cost of purchasing the same representative bundle of goods and services in different countries of the world Regular surveys are carried out to ascertain the proper levels of remuneration for executives employed... invention (O3) A discovery of a new product or process of production which is often crudely measured by PATENT statistics Economists have analysed the rate of invention as a function of the business cycle, the type of market or the organization of scientific research See also: innovation; research and development inventory (M2) The stocks of goods held by a firm for the purposes of production or final... comparison of the prices of goods of different countries, or of unit labour costs, expressed in the same currency To avoid the problems of translating one currency into another, sometimes the comparison is made in terms of the amount of labour time needed to produce a particular good, e.g a car with a 2-litre engine International Development Association (F3) Formed in 1960 as an affiliate of the International... Insider-Outsider Theory of Employment and Unemployment, Cambridge, MA, and London: MIT Press Solow, R.M (19 85) ‘Insiders and outsiders in wage determination’, Scandinavian Journal of Economics 87: 411–28 insolvency (K0, M2) The condition of a legal person with liabilities in excess of assets This inability to meet the demands of creditors usually leads to BANKRUPTCY instant monetarism (B2) The school of thought,... of their implicit nature Employers make such tacit agreements as part of their pursuit of long-term profitability This concept was inspired by OKUN’s study of STAGFLATION in the 1970s See also: implicit contract theory invisible trade (F1) International trade in services, particularly banking, insurance, shipping, tourism and professional advice This is the principal economic activity of the City of. .. many combinations of two goods, all of which give the consumer the same level of UTILITY As each combination renders the same utility, the consumer is ‘indifferent’ as to which bundle of goods to choose The curves further from the origin represent higher levels of utility Indifference curves must not intersect for otherwise two different levels of utility are represented at the point of intersection... Rutherford institutional economics (A1) An approach developed by a succession of US economists, beginning with VEBLEN, who have used a variety of social science disciplines to analyse the structure of economies, the process of economic change and the nature of economic decision making Prominent contributors to this approach include John COMMONS and AYRES GALBRAITH is the last major figure of the school References... itself the market rate of interest to ensure it uses its resources well internal debt (H6) The debt a government owes to the firms and households of the country it rules This is the result of a government spending more than it taxes See also: external debt internal economics of the firm (J4, M2) see internalization theory; internal labour market internal economy of scale (D0) An ECONOMY OF SCALE occurring . Rutherford goodscanberegardedasbothwealthand illth,e.g.tobacco.AtermcoinedbyJohn Ruskininthenineteenthcentury. Seealso:bad;wealth References Ruskin,J.(19 85) UntothisLast,essay4, London:Penguin;NewYork:Viking Penguin. immigration(F2,J1) Thepermanentsettlingofpeoplefrom othercountries.Immigrantstakeupa newresidencetoescapethepovertyor persecutionoftheiroriginalcountries,to increasetheirpersonaland ECONOMICWEL- FARE inanewcountryortojoinrelatives whohavealreadymigrated.Theeffectsof immigrationonacountryinclude,atthe macrolevel,impactsoninflation,technical progressandpublicexpenditureand,at themicrolevel,achangeinthepatternof demandforgoodsandservicesandextra laboursupplytoparticularlabourmar- kets.Immigrantsareabsorbedintoan economyindifferentways:as ENTREPRE- NEURS ,asmembersoftheSECONDARYLA- BOURMARKET orintoenclaves. Seealso:enclaveeconomy;migration References Piore,M.I.(1979)BirdsofPassage:Mi- grantLaborandIndustrialSocieties, NewYork:CambridgeUniversityPress. immiseration(P1) Theincreasingpovertyoftheworking classunder CAPITALISM.MARXdidnot equatethissimplywithafallinrealwages asimmiserationhasalsopsychological andspiritualdimensions. Seealso:alienation;divisionoflabour References Plamenatz,J.(19 75) KarlMarx’sPhiloso- phyofMan,Oxford:ClarendonPress. immiserizinggrowth(O4) Adeclineinthe ECONOMICWELFAREofa country,despiteanexpansionofitspro- ductionandexports,broughtaboutbya deteriorationinits TERMSOFTRADE. References Bhagwati,J.N.(1 958 )‘Immiserizinggrowth: ageometricalnote’,ReviewofEconomic Studies 25: 201 5. Johnson,H.G.(1967)‘Thepossibilityof incomelossesfromincreasedefficiency orfactoraccumulationinthepresence oftariffs’,EconomicJournal77: 151 –4. impactmultiplier(E0) Theimpactonanationaleconomyina givenyearofthe EXOGENOUSVARIABLESfor thatyearandthe ENDOGENOUSVARIABLESfor prioryears. References Goldberger,A.S.(1 959 )ImpactMultipliers andtheDynamicPropertiesoftheKlein- GoldbergerModel,Amsterdam:North- Holland. imperfectcompetition(L1) Thestateofamarket,similarto MONOPOLIS- TICCOMPETITION ,firstidentifiedbyJoanRO- BINSON .Thetermisalsousedinthebroad sensetorefertoallmarketswithoutallthe characteristicsof PERFECTCOMPETITION. References Robinson,J.(1933)TheEconomicsofIm- perfectCompetition,London:Macmillan. imperialism(P1)seecapitalist imperialism implementation. the analysis of ANTITRUST but now includes the examination of all the func- tions of management. A major aspect of the subject is the study of market struc- tures and an examination of the implica- tions. Rutherford goodscanberegardedasbothwealthand illth,e.g.tobacco.AtermcoinedbyJohn Ruskininthenineteenthcentury. Seealso:bad;wealth References Ruskin,J.(19 85) UntothisLast,essay4, London:Penguin;NewYork:Viking Penguin. immigration(F2,J1) Thepermanentsettlingofpeoplefrom othercountries.Immigrantstakeupa newresidencetoescapethepovertyor persecutionoftheiroriginalcountries,to increasetheirpersonaland ECONOMICWEL- FARE inanewcountryortojoinrelatives whohavealreadymigrated.Theeffectsof immigrationonacountryinclude,atthe macrolevel,impactsoninflation,technical progressandpublicexpenditureand,at themicrolevel,achangeinthepatternof demandforgoodsandservicesandextra laboursupplytoparticularlabourmar- kets.Immigrantsareabsorbedintoan economyindifferentways:as ENTREPRE- NEURS ,asmembersoftheSECONDARYLA- BOURMARKET orintoenclaves. Seealso:enclaveeconomy;migration References Piore,M.I.(1979)BirdsofPassage:Mi- grantLaborandIndustrialSocieties, NewYork:CambridgeUniversityPress. immiseration(P1) Theincreasingpovertyoftheworking classunder CAPITALISM.MARXdidnot equatethissimplywithafallinrealwages asimmiserationhasalsopsychological andspiritualdimensions. Seealso:alienation;divisionoflabour References Plamenatz,J.(19 75) KarlMarx’sPhiloso- phyofMan,Oxford:ClarendonPress. immiserizinggrowth(O4) Adeclineinthe ECONOMICWELFAREofa country,despiteanexpansionofitspro- ductionandexports,broughtaboutbya deteriorationinits TERMSOFTRADE. References Bhagwati,J.N.(1 958 )‘Immiserizinggrowth: ageometricalnote’,ReviewofEconomic Studies 25: 201 5. Johnson,H.G.(1967)‘Thepossibilityof incomelossesfromincreasedefficiency orfactoraccumulationinthepresence oftariffs’,EconomicJournal77: 151 –4. impactmultiplier(E0) Theimpactonanationaleconomyina givenyearofthe EXOGENOUSVARIABLESfor thatyearandthe ENDOGENOUSVARIABLESfor prioryears. References Goldberger,A.S.(1 959 )ImpactMultipliers andtheDynamicPropertiesoftheKlein- GoldbergerModel,Amsterdam:North- Holland. imperfectcompetition(L1) Thestateofamarket,similarto MONOPOLIS- TICCOMPETITION ,firstidentifiedbyJoanRO- BINSON .Thetermisalsousedinthebroad sensetorefertoallmarketswithoutallthe characteristicsof PERFECTCOMPETITION. References Robinson,J.(1933)TheEconomicsofIm- perfectCompetition,London:Macmillan. imperialism(P1)seecapitalist imperialism implementation