Liberman, Yevsei, 1912– (B3) Soviet economist and professor at the Institute of Engineering and Economics, Kharkov University, whose proposals for reforming the planning system, published as Plan, Profit and Premium in 1962, led to major changes in the running of Soviet enterprises set out in the Enterprise Sta- tute of 1965. He criticized the use of gross output as the key performance target and suggested that some notion of ‘profit’ acceptable to socialist theory should be employed. It was hoped that this change would lead to more efficient use of factor inputs and would make possible the set- ting up of incentive funds in each enter- prise to reward more productive managers and workers. libertarian economics (B2) A school of economics which emphasizes the importance of markets and the limited role of governments. Although the PHYSIO- CRATS and some CLASSICAL ECONOMISTS preached this laissez-faire approach, it is particularly associated with the AUSTRIAN, CHICAGO and NEOCLASSICAL SCHOOLS, making HAYEK and FRIEDMAN its gurus. lifeboat operation (E5, G2) The rescue of UK SECONDARY BANKS in 1973–4 by the BANK OF ENGLAND, assisted by London and Scottish CLEARING BANKS. Imprudent lending by non-clearing banks during the property boom caused many of these minor banks to have an increased number of bad debts. The nature of the Bank of England’s help was compared with a rescue of the shipwrecked. life-cycle hypothesis (E2) Ando and Modigliani’s theory of saving and the CONSUMPTION FUNCTION which re- cognizes that for each age group there is an associated AVERAGE PROPENSITY TO CON- SUME with the consequence that a change in a country’s age distribution will affect aggregate saving and consumption. This hypothesis has been applied to the finan- cing of pensions as during a person’s working life saving is accumulated which is spent in retirement. A reverse life-cycle hypothesis asserts that at the beginning of one’s working life there is DISSAVING to finance education, house purchase or con- sumer durables: expenditure precedes sav- ing in these cases. References Ando, A. and Modigliani, F. (1963) ‘The life cycle hypothesis of saving: aggregate implications and tests’, American Eco- nomic Review 53: 55–84. lifetimeaveraging(H2)seelong-term incomeaveraging lifetime client value (M3) The benefit to a firm from retaining the loyalty of a client. Marketing costs includ- ing advertising will be lower and the market will be more stable. light industry (L6) An industry using raw materials and components light in weight and noted for a great amount of VALUE ADDED, e.g. the computer assembly industry. Seealso:heavyindustry;industry limited arbitrage (G0) Market activity that is too weak to bring security prices back to their efficient levels © 2002 Donald Rutherford because of the arbitrageurs having limited capital, short investment horizons and an aversion to risk. limited company (L2) A firm owned by shareholders whose liability is limited to the amount of capital subscribed. Since the mid-nineteenth cen- tury this has been a powerful means of financing large firms. The extent to which this form of organization is used varies from country to country. In Germany, for example, as it is viewed with suspicion, very few companies are limited liability and public. The development of SECONDARY MARKETS in unlisted securities has encour- aged the movement to limited liability. Seealso:jointstockcompany;Unlisted SecuritiesMarket limited general competitive bidding (D4) A form of competition limited to those who have stated qualifications. limited market liberalization (P0) A partial transition from a planned to a MARKET ECONOMY. Goods allocated under the plan cannot be resold and scheduled deliveries cannot be purchased on the market. Without these priorities, there would be full market liberalization. limited partnership (K2, M1) A partnership consisting of limited, or sleeping, partners who provide finance rather than contribute to management and general partners who manage the firm. Limited partners have no personal liability; general partners have unlimited liability. limit order (G1) An order to buy a SECURITY at or below a specified price or to sell it for at least a particular price. Seealso:marketorder limit order book (G1) A list for a SECURITY of LIMIT ORDERS ranked by price and then chronologically accord- ing to the time entry that is kept by a SPECIALIST. Priority is given to stocks that have been longest on the book. Increas- ingly there are movements towards the creation of a computerized central book for each stock exchange. limit price (D4) The highest common price set by a group of sellers colluding together that they believe they can charge without new firms seeking to enter that industry in search of high profits. Lindahl equilibrium (H4) A set of ‘Lindahl prices’ such that at those prices everyone demands the same level of each PUBLIC GOOD. These prices are indivi- duals’ shares of the tax burden. This equilibrium is the equivalent of a compe- titive equilibrium for an economy with public goods. When in equilibrium, the tax rate for an individual will equal his or her marginal utility from that public good. All markets for private goods are perfectly competitive and the government provides public goods. PARETO OPTIMALITY is achieved by an appropriate redistribution of in- come. References Milleron, J.C. (1972) ‘Theory of value with public goods: a survey article’, Journal of Economic Theory 5: 419–77. Lindahl price (H2, H4) The share of total tax revenue paid by an individual that is the basis for his or her ‘demanding’ PUBLIC GOODS. This price is equal to the MARGINAL UTILITY from a public good. The sum of Lindahl prices for an economy is equal to the cost of supplying public goods. linearcorrelation(C1)seelinear regression linear programming (C1, I3, R4) An optimization technique originally ap- plied to two problems: the transportation problem of determining the cheapest pat- tern of routes to supply a number of markets from a number of sources, and the diet problem of determining the cheap- est diet which will provide a minimum © 2002 Donald Rutherford nutritional intake. Since the first use of this technique in the 1940s, it has come to be used extensively in the public and private sectors. References Baumol, W.J. (1958) ‘Activity analysis in one lesson’, American Economic Review 48: 837–73. Dorfman, R., Samuelson, P.A. and Solow, R.M. (1958) Linear Programming and Economic Analysis, New York: McGraw-Hill. Gass, S.I. (1969) Linear Programming Methods and Applications, 3rd edn, New York: McGraw-Hill. Luenberger, D.E. (1984) Introduction to Linear and Non-Linear Programming, 2nd edn, Wokingham and Reading, MA: Addison-Wesley. linear regression (C1) The relationship between two variables which approximates graphically to a straight line. Seealso:leastsquaresmethod line item veto (H6) The power to veto part of a budget whilst approving the rest. In the USA, forty-three governors can veto parts of state budgets but the US president has no such power over the federal budget. linkage (D2) The forward or backward connection be- tween industries at different stages of pro- duction. The measurement of the increases in employment and value added brought about by the expansion of one part of an ECONOMY uses the linkage idea. Most aspects of an economy – prices, taxes, public expenditure, technology and infor- mation – are considered. Some enthu- siasts, who have emphasized linkages as the key to ECONOMIC GROWTH, have ignored the existence of resource constraints. Seealso:backwardlinkage;forwardlink- age linkage models (C5) Large-scale econometric models that link together national macroeconomic models to show the relationships between major national economies, especially trade and monetary flows and exchange rates. Seealso:COMET;INTERLINK Lipsey, Richard George, 1928– (B3) Canadian economist educated at the Uni- versity of British Columbia, Toronto, and the London School of Economics, where he was later lecturer and professor from 1955 to 1964. He was professor at Essex University from 1964 to 1970 and subse- quently at Queen’s University in Kingston, Ontario, from 1970 to 1985. He is famous to hundreds of thousands of students in the Western world for his textbooks: An Introduction to Positive Economics, first published in 1963, which is, as its name suggests, strongly empirical in tone and hence has been frequently revised; and Economics, which was first published in 1966 in the USA. He first made his mark as an economist with his joint article with Lancaster, ‘The general theory of the second best’ (Review of Economic Studies June 1956), which made a major contribution to welfare econom- ics. Subsequently, in a series of articles on inflation, he provided the microeconomic explanations for the PHILLIPS CURVE. His numerous other works include articles on CUSTOMS UNIONS, LOCATION THEORY and monetary theory. References Lipsey, R.G. (1991) The Collected Essays of Richard G. Lipsey, 3 vols, Aldershot: Edward Elgar. liquid assets (E5, G2) Cash plus short-term assets (loans and bills of exchange soon to mature) which can be quickly converted into cash without a capital loss to the asset holder. liquid assets ratio (E5) A reserve assets ratio which takes into account both cash and monetary assets soon to mature and hence convertible into cash with small risk of capital loss. At © 2002 Donald Rutherford various times from 1971 the UK banks, for example, were asked to have different liquidity ratios, the required percentage changing with the redefinition of liquid assets. liquidity (E4, G0) The characteristic of assets immediately available for the discharge of financial obligations: the most liquid of assets is CASH. For there to be pure liquidity, it is necessary that the asset market is perfect with the consequence that the sale of an asset does not affect its price. Also the asset is riskless because its price is con- stant. Securities are only liquid if there is an organized market for them. liquidity preference (E4) Reasons for holding money classified by KEYNES according to motive. He identified the TRANSACTIONS, PRECAUTIONARY and SPEC- ULATIVE DEMAND FOR MONEY . Seealso:IS–LMcurves liquidity trap (E4) The minimum floor to the rate of interest. Keynes expounded the view that the SPEC- ULATIVE DEMAND FOR MONEY would introduce this factor price rigidity because security prices would rise to a level that investors consider a maximum and consequently interest rates would reach a minimum. This ‘trap’ challenges the classical view that complete flexibility in factor prices brings about a full-employment equili- brium. liquid market (G1) A market where buying and selling are easy and low cost with the consequence that prices tend to their underlying va- lues. List, Friedrich, 1789–1846 (B3) German economist and leading defender of PROTECTIONISM who was professor of economics at the University of Tubingen from 1817 to 1819, a journalist in the USA from 1825 to 1832 and subsequently US Consul in Leipzig and then Baden. He campaigned vigorously for the creation of a German railway system and Zollverein, or CUSTOMS UNION. He committed suicide. His most celebrated work was The Na- tional System of Political Economy, origin- ally published in 1841. In it he is very critical of SMITH’s ‘cosmopolitan’, or FREE- TRADE , economics for assuming that there was the universal peace which free trade requires and for ignoring the fact that Great Britain had grown strong through protectionism. List argued that free trade was to the benefit of merchants rather than to the advantage of a nation as a whole, for the basis of national economic power is the encouragement of ‘productive powers’, especially manufacturing, through protection. Seealso:mercantilism listedbank(G2)seeclearingbank; commercialbank listed company (L2) A company whose securities are quoted in the list of a stock exchange’s traded stocks. This listing increases the marketability of a company. listed security (G1) A stock or share whose price is published on the official list of a stock exchange. The INTERNATIONAL STOCK EXCHANGE insists that for a company’s securities to be listed it must agree to publish regularly many types of financial information, in addition to what is required under company legisla- tion. list price (D4) A price announced in a catalogue or other list of a producer or retailer. This is not necessarily a TRANSACTION PRICE as many list prices are subject to discounts and negotiation. little dragons (P0) South Korea, Taiwan, Hong Kong, Singa- pore. Seealso:newlyindustrializedcountry living wage (J3) A MINIMUM WAGE sufficient to cover © 2002 Donald Rutherford expenditure on food, fuel, clothing and relaxation. Lloyd’s (G2) London insurance market founded in the coffee house of Edward Lloyd in 1688. It consists of underwriting members with unlimited liability for the risks they have underwritten and non-underwriting mem- bers. Syndicates of underwriters are re- sponsible for most of the risk. Originally, Lloyd’s was concerned with marine insur- ance but it has diversified its interests to fire, accident, motor and aviation insur- ance. Lloyd’s Agents throughout the world and the Lloyd’s List provide crucial infor- mation for the insurance industry. Although based in the UK, Lloyd’s has long done most of its business with US insurance companies. References Hodgson, G. (1984) Lloyd’s of London. A Reputation at Risk, London: Allen Lane and Viking Press. Lloyd’s name (G2) An underwriting member of Lloyd’s insur- ance market who accepts unlimited liabi- lity. The tax advantages associated with membership have always attracted wealthy investors. Mismanagement, alleged fraud and billions of claims over asbestos and oil spillages in the 1980s caused the bank- ruptcy of many names. In 1993 Lloyd’s rules were changed to allow corporate investors to join. The number of names fell from 34,000 at its peak to about 3,000 in 2000. LMcurve(E1)seeIS–LMcurves load fund (G2) A MUTUAL FUND charging disproportio- nately large commissions on smaller in- vestments. Seealso:no-loadfund loanable funds theory (E4) A popular theory of the determination of the rate of interest dominant in economics before Keynes’s General Theory. Under the theory, the investment demand for funds and the supply of loanable funds through savings would in equilibrium bring about a unique rate of interest. loanshark (G2, K4) A person lending money at exorbitant rates of interest usually to borrowers with no collateral and no access to conven- tional lenders such as banks. This form of lending has long been a major activity of organized crime. loan stock (G1) A stock exchange security with a fixed rate of interest and, usually, prior entitlement to payment out of any available earnings. Seealso:debenture Local Enterprise Agency (R5) An agency in the UK financed by private sector firms to help potential entrepre- neurs to set up in business. This aid chiefly takes the form of free specialist services. local expectations theory (G1) The assertion that over a short-term in- vestment horizon the yields of bonds of different maturities will be the same. local government finance (H7) The financing of the government of a region, city or district by local taxation, charges and grants from central govern- ment. At the local level property taxes, local sales taxes and local income taxes are the principal forms of taxation used. In order to maintain the same standards of service throughout a country, a national government often provides grants to cover part of local costs, e.g. educational expen- ditures. Major problems arise if the local revenue is too small to meet local needs, e.g. if there is a large non-resident popula- tion, as in New York City or Glasgow, using facilities without paying full local taxes. Also, if there is not a clear separa- tion of powers between the levels of government, a local government might pursue macroeconomic policies, e.g. em- ployment policies, which are too expensive for it to finance, as has happened in the © 2002 Donald Rutherford UK. Although property taxes are often a major source of local revenue and provide an additional tax base, they have been criticized for their regressive nature over some ranges of incomes. Seealso:communitycharge;federalfi- nance;fiscalmobility;rates local labour market (J4) A geographical market which brings to- gether buyers and sellers within a given area, often defined as a journey-to-work area in which employers and workers are in close contact with each other. CLASSICAL ECONOMISTS , following SMITH’s celebrated discussion of WAGE DIFFERENTIALS, believed that the free movement of workers in response to wage differentials would bring about an equalization of the net advan- tages of employment. Labour economists believe that there are fewer market imper- fections, especially of an informational kind, in these local markets than in other labour markets. However, the conflict be- tween INTERNAL and EXTERNAL LABOUR MAR- KETS has made it more difficult to see local markets of this kind functioning in a classical manner. Also, the concept applies mostly to markets for less skilled workers. Managerial and professional workers con- sider themselves participants in the wider national and international labour markets. Seealso:labourmarket;labourmobility References Robinson, D. (ed.) (1970) Local Labour Markets and Wage Structures, London: Gower. Smith, A. (1776) The Wealth of Nations, ed. R.H. Campbell and A.S. Skinner, Book 1, ch. 10, Oxford: Clarendon Press, 1976. localmonopoly(L1)seespatial monopoly local public good (H4) A public good locally provided for the benefit of a local community and financed largely out of local taxation; a spatially limited public good. Seealso:Tiebouthypothesis local union (J5) US LABOR UNION which organizes workers in one establishment, company or craft and hence is the smallest part of a US labor union. In 1982, the average local union had only 200 members. Locals play a significant role in collective bargaining, especially the negotiation of labour con- tracts between labour and management, and are combined into federations known as INTERNATIONAL UNIONS. A US labor union member has direct contact with the local, and not the international, union. Seealso:companyunion;enterpriseunion location theory (R1, R3) A study of the determinants of the geo- graphical distribution of agriculture, in- dustry and other economic activities. An early influential model was von Thu ¨ nen’s which viewed the location of activities in terms of concentric rings around a central urban market with land uses and land values being reduced the further they were from the centre. Later theorists, including Losch, sought to explain how industrial activity would be located at the point of minimum transport cost and maximum profitability, given the dispersion of raw material sources and consumers. As the theory of the firm was expanded to con- sider aims other than PROFIT MAXIMIZATION, location theory took into account the possibility that a location could be chosen to satisfice rather than maximize the benefit to a fir m and that sales rather than profits were of dominant concern. Much of location theory is now incorporated into URBAN ECONOMICS and REGIONAL ECO- NOMICS as location theorists have increas- ingly studied urban settlements. References Beckman, M. (1968) Location Theory, New York: Random House. Hall, P. (ed.) (1966) Von Thunen’s Isolated State (1826), Oxford and New York: Pergamon. © 2002 Donald Rutherford Isard, W. (1956) Location and the Space Economy, Cambridge, MA: MIT Press. Losch, A. (1954) The Economics of Loca- tion, New Haven, CT: Yale University Press. locked-in effect (E4, H2) 1 The effect of rising interest rates on the holding of government bonds. Holders of long-term government securities in times of rising interest rates (and hence falling bond prices) are reluctant to sell because of the consequent capital losses. 2 The effect of capital gains taxes being greater than inheritance taxes so that shareholders can benefit from refraining from selling stocks that have appre- ciated in value and passing them un- taxed to their heirs. locked-in industry (L0) An industry which cannot easily move because some locations are more expensive than others. Seealso:footlooseindustry locked-in knowledge (O3) Technical knowledge specific to a particu- lar production process and not transfer- able to other processes; also known as ‘tacit’ knowledge. Seealso:footlooseknowledge locomotive effect (O4) The expansionary effect of the economic growth of a large country on smaller countries which experience an increase in demand for their exports. lockout (J5) Industrial action by an employer to pre- vent employees from working until they agree to the terms and conditions of employment proposed. Seealso:strike logistic cycle (E3, N0) A cycle in economic activity of 150–300 years’ duration which, when plotted as a graph of industrial production against time, approximates to the statistical logis- tic curve of an expansion phase followed by a stagnation phase. The first cycle was from 1100 to 1450, the second from 1450 to 1750 and the third has not been completed. Seealso:Kondratieffcycle;longwave References Cameron, R. (1973) ‘The logistics of European economic growth: a note on historical periodization’, Journal of Eur- opean Economic History 2: 145–58. logit model (C5) An econometric model comparing the odds of the occurrence of an event or state of affairs with the non-occurrence of that event or state. To obtain a linear model the logarithm of the odds ratio is used – hence the term logit. Seealso:probitmodel;Tobinmodel logrolling (H0) The political practice, extensively practised in the USA, of legislators trading votes. A vote is given for a particular proposal in return for voting for another proposal. Thus, projects with only minority support can be approved because their proposers have given their votes on other issues. The concept is essential to understanding how US federal public expenditure is approved. Lombard rate (E4) The rate of interest usually 1/2 per cent above the discount rate charged by the BUNDESBANK when acting in its capacity as LENDER OF LAST RESORT. Banks can borrow for up to three months against the collat- eral of certain high-quality securities, which include treasury bills and federal bonds. Lome ´ Convention (F0) An agreement, originally signed in 1975 and subsequently extended in 1980 and 1985, which is unique in north–south relations. It was between the members of the EUROPEAN COMMUNITY and forty-six de- veloping countries of Africa, the Carib- bean and the Pacific. It has exempted these less developed countries from all © 2002 Donald Rutherford industrial and 96 per cent of agricultural tariffs of the European Community and is established through European Develop- ment Fund technical and financial assis- tance. Although another seventeen less developed countries have become benefici- aries, Asian countries are still excluded. The granting of aid under this scheme is now subject to human rights being re- spected in the recipient country. The amount of aid per capita provided is only a few US dollars per head. References Alting von Geusau, E.A.M. (ed.) (1977) The Lome ´ Convention and a New Interna- tional Economic Order, Leyden: Sijthoff. London Discount Market Association (G1) London’s nine DISCOUNT houses that con- stitute the UK’s short-term money market. London Inter-Bank Offered Rate (E4) The interest rate on dollar deposits lent between first-class banks in London. Its principal use is as the base interest rate on which the prices of EURODOLLAR and other EUROCURRENCY loans are calculated. The INTERNATIONAL MONETARY FUND uses it as a benchmark for calculating the interest rate on most of its lending. These loans specify an agreed spread above a LIBOR three- or six-month rate, usually of ½–2 per cent. There is no set procedure or set time for changing LIBOR. Other financial centres, including Paris, Singapore and Tokyo, have offered rates. London International Financial Futures Exchange (F1) A market founded in 1982 to deal in a wide range of FUTURES in financial secu- rities, including gilts, US Treasury bonds and Eurodollars; founded in 1982. It is smaller than the leading Chicago market, founded in 1972. New York, Canada and Australia have similar markets. London Traded Options Market (F1) A market associated with the INTERNA- TIONAL STOCK EXCHANGE , founded in 1978. In 1991, it merged with the LONDON INTER- NATIONAL FINANCIAL FUTURES EXCHANGE . long (F3) A foreign exchange surplus. A foreign exchange dealer is ‘in long’ when his or her bank has a surplus of a particular currency. Seealso:short Long Boom (N1, O4) The period from the 1940s to 1960s (or 1990 some assert) which was characterized by historically high economic growth rates, low unemployment and fairly stable prices. Cheap oil prices helped to sustain the boom. long fraud (G0, K4) A method of luring a supplier into advan- cing TRADE CREDIT through a borrower acquiring a reputation for settling ac- counts. The fraudster reliably pays all debts when due and, after establishing such trustworthiness, incurs a large debt, especially on a major order, and then disappears. longitudinal data (C8) Statistical information on changes to a cohort through time, e.g. the career of persons. Seealso:timeseries long period (D0) 1 The period in which all adjustments have been made to a price change. 2 The period in which supply is very ELAS- TIC as a great expansion in the quanti- ties of factors of production is possible. Seealso:Marshallianlongperiod long-term credit bank (G2) A bank that makes long-term loans to finance industry and arranges the issue of securities. Major examples of these banks are three state-owned Japanese banks, the Industrial Bank of Japan, the Long-Term Credit Bank of Japan and Nippon Credit Bank. Exposure to domestic declining industries in which they have long invested © 2002 Donald Rutherford and increasing competition from other banks have forced them to diversify into new markets, including the international syndicated loan market. long-term income averaging (H2) A method of calculating income to pro- duce fairer progressive taxation of persons with fluctuating incomes. Without aver- aging, a person with only occasional years of high income would be taxed much more heavily in those years than is fair when the years of low income are also taken into consideration. The principal method sug- gested is to tax cumulative average income in order to avoid long-term taxation un- duly reflecting the few years of high income. However, there are critics of this system as the stabilization effects of pro- gressive taxation are reduced. Australia has repeatedly attempted to deal with this problem. In the USA, the TAX REFORM ACT 1986 eliminated income averaging but re- duced tax burdens by cutting top marginal tax rates. References Musgrave, R.A. and Shoup, C.S. (eds) (1959) Readings in the Economics of Taxation, pp. 77–92, London: Macmil- lan. long wave (E3) A cycle in economic activity of about fifty years’ duration, usually referred to as the KONDRATIEFF CYCLE. This cycle in time series data was noted as early as 1847 by Hyde Clarke. A variety of explanations have been suggested for these waves, including a cluster of major INNOVATIONS, wars, major changes in transportation systems and major changes in primary product mar- kets. Seealso:logisticcycle References Reijnders, J. (1990) Long Waves in Eco- nomic Development, Aldershot: Edward Elgar. van Duijn, J.J. (1983) The Long Wave in Economic Life, London: Allen & Un- win. Lorenz curve (C1, D6) A graphical representation of INEQUALITY first proposed in 1905 by US-born statisti- cian Max Otto Lorenz. On the vertical and horizontal axes are measured accumu- lated percentage distributions, e.g. of firms and their sales. This is used in the study of income distribution and of industrial CON- CENTRATION . loss function (C1) This shows the deviation of a data point from a least squares fitted line through a scatter of points measured on the vertical axis as a function of the deviation mea- sured on the horizontal axis. This has been applied to DISUTILITY to indicate what has to be minimized. Seealso:leastsquaresmethod loss leader (M3) A good or service sold at less than the cost of producing it as an inducement to consumers to use a particular retail outlet. Supermarkets have made much use of this marketing device. Lotharingianaxis(R1)seeRhinelands hourglass lottery (C7) A game of chance to obtain prizes funded by the sale of tickets; a set of pay-offs each with its own probability. In Italian ‘lotto’ © 2002 Donald Rutherford means destiny or fate. Lotteries are as ancient as Moses’ in the Book of Num- bers, chapter 26, and Julius Caesar’s to fund repairs to Rome. Several major US universities and the British Library used lotteries to raise initial funding. Today many US states have their own lotteries. A national lottery was reintroduced in the UK in 1994. Within three years 70 per cent of the population were regularly playing the game and 13 per cent of the gaming market had been secured by the lottery. A private consortium, Camelot, has run the lottery for a fee of 1 per cent of the sales revenue. It has distributed 50 per cent of the take in prize money and 28 per cent has been devoted to ‘good causes’ not otherwise funded by the government, especially sport and the arts. Lottery fever has always provoked concern as the gulli- ble poor can ruin themselves through buying tickets. The odds of winning the jackpot in the UK lottery, 14 million to 1, illustrate the view of Adam Smith: ‘the chance of gain is naturally overvalued, we may learn from the universal success of lotteries’ (Wealth of Nations, Book I, ch. X, Part I). Louvre Accord (F3) An agreement of February 1987 between the leading industrialized nations of the OECD to stabilize exchange rates between major currencies by maintaining the value of the US dollar in a period with a large US balance of payments deficit. The USA promised to use fiscal measures to reduce demand for imports and Japan and West Germany promised to employ monetary and fiscal means to expand their econo- mies, with the hope the demand for US exports would increase. In order to keep the dollar’s value high, higher US interest rates and a fall in stock market values were inevitable. The accord provided a useful forum for the discussion of the economic policies of leading economies and their international implications. lower quartile (C1) A value in a set of numbers such that three-quarters of the numbers are greater in value; the seventy-fifth percentile. This value is a benchmark to measure LOW P AY. Seealso:median;upperquartile low pay (J3) The pay of workers in the bottom part of the earnings structure. Various measures of low pay include being paid less than the lower quartile of earnings (bottom 25 per cent), less than the level of social security benefit or less than is paid to comparable workers. Increasingly low pay is regarded as relative deprivation rather than being below the subsistence level – even SMITH and RICARDO recognized that the notion of subsistence varies with time and place, being not only sufficient for food, housing and clothing but enough to participate fully in a particular society. The low-pay problem is narrower than the poverty problem as it concerns only employed persons who either regard it as a problem because they are paid less than their marginal products, or regard it as unjust to receive little for working normal hours. Suggestions for removing this labour mar- ket problem include MINIMUM WAGE legisla- tion, a narrowing of WAGE DIFFERENTIALS and INCOMES POLICIES biased towards the low paid. loyalty bonus (G0) The extra shares awarded to the original shareholders of a company for retaining their investment for a stipulated period. Bonuses of this kind have been a feature of UK PRIVATIZATION issues. Loyd, Samuel Jones, 1796–1883 (B3) English banker and leading monetary theorist of the CURRENCY SCHOOL. Educated at Cambridge University; Baron Over- stone from 1850. As a Member of Parlia- ment and subsequently adviser to the BANK OF ENGLAND , he opposed many of the banking innovations of his day, including joint stock banking. His recommendations formed the basis for the BANK CHARTER ACT 1844 . © 2002 Donald Rutherford [...]... Journal of Econometrics 15: 65 –92 Meade, James E., 1907– 96 (B3) UK economist educated at Cambridge and Oxford Universities As Economics Fellow of Hertford College, Oxford, from 1930 to 1938 he contributed to the emerging macroeconomics of KEYNES by participating in the CAMBRIDGE CIRCUS His subsequent career was spent at the League of Nations (1940–7), as professor of commerce at the London School of Economics. .. value in exchange, the decline in the rate of profit and labour as a basis of value, he was able to form them into a powerful new synthesis This consisted of the TURGOT–SMITH stages theory, an analysis of the circulation of money and of commodities and his examination of the determinants of SURPLUS VALUE to expose the defects of capitalism in a way unparalleled in economics But he has not been without his... public employment offices often provide a free service See also: market clearing matching function (D4, M4) 1 The number of contacts recurring at any moment of time as a function of the number of searchers on both sides of a market 2 A statement in accounts of all costs associated with a stream of income material balance (E1) The balance of demand and supply for a particular class of commodities This... Secretary of State, which, in the form of economic and military grants and loans, amounted to $ 16. 4 billion in the period 1948–52 Western Europe’s loss of overseas investments, the ending of much of its trade with Eastern Europe and the decline in its TERMS OF TRADE necessitated outside help In 19 46, large European balance of payments deficits required immediate US assistance consisting of shipments of goods... NEOCLASSICAL ECONOMICS was to emphasize the microeconomic character of much of economics; KEYNESIANISM had the opposite effect as its construction of macroeconomic models returned economics to the wider concerns which had been prominent in CLASSICAL, and other, schools of economics Increasingly economists have found it difficult in their construction of models to separate microeconomics from macroeconomics... Industry (1879)), and was appointed Principal and Professor of Political Economy at the new University College, Bristol From 1885 to 1908 he was professor of political economy at Cambridge, retiring early to concentrate on his writing It was the publication of his Principles of Economics in 1890 that established his leadership of the economics profession This beautifully written book, which relegates... Maximization of the satisfaction of the managers of a FIRM The utility of managers will be increased if their status improves by an enlargement of staff expenditures, as this shows ability to manage, or if managerial salaries and profits are higher than an acceptable minimum level References Williamson, O.E (1 964 ) The Economics of Discretionary Behavior: Managerial Objectives in a Theory of the Firm,... University and subsequently was professor of economics there from 19 46 to 1 965 From 1937 to 1955 he was Director of the Economic Research Institute His exposition of trade cycle analysis has been applied to Swedish stabilization policy References Lundberg, E (1937) Studies in the Theory of Economic Expansion, London: P.S King Lundberg lag (E2) The slow adjustment of production to changes in income... power, the consequence of the INELASTICITY of the demand curve facing it, often results in high profits See also: concentration market prices (E3) A valuation of the NATIONAL INCOME that includes indirect taxes net of subsidies See also: factor cost; gross national product market rate of interest (E4) The RATE OF INTEREST set by a particular financial market See also: natural rate of interest; Wicksell... organizer of the Social Democratic Parties of Germany and Poland As early as 1904, despite following many of MARX’s ideas, she criticized LENIN for his autocratic centralist views Many aspects of the Bolshevik Revolution of 1917 in Russia upset her, including the methods used and the signing of the Treaty of Brest-Litovsk with Germany In References Luxemburg, R (1951) The Accumulation of Capital, London: Routledge . Uni- versity of British Columbia, Toronto, and the London School of Economics, where he was later lecturer and professor from 1955 to 1 964 . He was professor at Essex University from 1 964 to 1970. Distinguished Ser- vice Professor of Economics since 1980. As a vigorous advocate of the theory of RATIONAL EXPECTATIONS, he has become a leader of the NEW CLASSICAL ECONOMICS School. References Lucas,. theory and policy of the TRADE CYCLE. He was educated at Stockholm University and subsequently was professor of economics there from 19 46 to 1 965 . From 1937 to 1955 he was Director of the Economic Research