Portal:Business and economics/Selected article/Archive

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October 2008

A bank run (also known as a run on the bank) occurs when a large number of bank customers withdraw their deposits because they believe the bank is, or might become, insolvent. As a bank run progresses, it generates its own momentum, in a kind of self-fulfilling prophecy: as more people withdraw their deposits, the likelihood of default increases, and this encourages further withdrawals. This can destabilize the bank to the point where it faces bankruptcy.

A banking panic or bank panic is a financial crisis that occurs when many banks suffer runs at the same time. A systemic banking crisis is one where all or almost all of the banking capital in a country is wiped out. The resulting chain of bankruptcies can cause a long economic recession. Much of the Great Depression's economic damage was caused directly by bank runs. The cost of cleaning up a systemic banking crisis can be huge, with fiscal costs averaging 13% of GDP and economic output losses averaging 20% of GDP for important crises from 1970 to 2007.

Several techniques can help to prevent bank runs. They include temporary suspension of withdrawals, the organization of central banks that act as a lender of last resort, the protection of deposit insurance systems such as the U.S. Federal Deposit Insurance Corporation, and governmental bank regulation. These techniques do not always work: for example, even with deposit insurance, depositors may still be motivated by beliefs they may lack immediate access to deposits during a bank reorganization.

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September 2008
Anonymous 17th-century watercolor of the Semper Augustus, famous for being the most expensive tulip sold during tulip mania.

Tulip mania or tulipomania (Dutch names include tulpenmanie, tulpomanie, tulpenwoede, tulpengekte, and bollengekte) was a period in the Dutch Golden Age during which contract prices for bulbs of the newly introduced tulip reached extraordinarily high levels and then suddenly collapsed. At the peak of tulip mania in February 1637 tulip contracts sold for more than 20 times the annual income of a skilled craftsman. It is generally considered the first recorded speculative bubble.[1] The term "tulip mania" is often used metaphorically to refer to any large economic bubble.[2]

The event was popularized by the book Extraordinary Popular Delusions and the Madness of Crowds, written by British journalist Charles Mackay in 1841, more than two centuries after the event. According to Mackay, at one point a speculator paid as much as 12 acres (49,000 m2) of land for a single bulb.[3] Mackay claims that many such investors were ruined by the fall in prices, and the Dutch economy fell into depression. Although Mackay's book is a classic of popular journalism that is widely reprinted today, his account is controversial. Some modern scholars believe that the bubble was not as extraordinary as Mackay described, or even that no economically meaningful bubble occurred.[4] There is also little evidence of significant economic distress after tulip mania.

Research on the tulip mania is difficult because of the very limited data from the 1630s—much of which comes from biased, anti-speculative sources.[5][6] Modern economists have proposed rational explanations for the high prices, though these are not universally accepted. Other flowers, such as the hyacinth, have also had high prices on the flower's introduction, that then fall dramatically. The high prices may also have been driven by expectations of a parliamentary decree that contracts could be voided for a small cost—thus lowering risk to buyers—rather than from an irrational speculative mania.

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August 2008

The Doha Development Round is the current trade-negotiation round of the World Trade Organization (WTO) which commenced at Doha, Qatar in November 2001. Its objective is to lower trade barriers around the world, permitting free trade between countries of varying prosperity. As of 2008, talks have stalled over a divide on major issues, such as agriculture, industrial tariffs and non-tariff barriers, services, and trade remedies.The most significant differences are between developed nations led by the European Union (EU), the United States (USA) and Japan and the major developing countries led and represented mainly by India, Brazil, China and South Africa. There is also considerable contention against and between the EU and the USA over their maintenance of agricultural subsidies—seen to operate effectively as trade barriers.

The Doha Round began with a ministerial-level meeting in Doha, Qatar in 2001. Subsequent ministerial meetings took place in Cancún, Mexico (2003), and Hong Kong (2005). Related negotiations took place in Geneva, Switzerland (2004, 2006, 2008); Paris, France (2005); and Potsdam, Germany (2007).

The most recent round of negotiations, July 23-29 2008, broke down after failing to reach a compromise on agricultural import rules.

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July 2008

Société Générale (EuronextGLE) is one of the main European financial services companies and also maintains extensive activities in others parts of the world. It is headquartered in France with the main head office in Tours Société Générale in the business district of La Défense west of Paris. The three main divisions are Retail Banking & Specialized Financial Services (particularly in France and Eastern Europe), Corporate and Investment Banking (Derivatives, Structured Finance and Euro Capital Markets) and Global Investment Management & Services.

Société Générale is one of the oldest banks in France. The original name was Société Générale pour favoriser le développement du commerce et de l'industrie en France (English: General Company for the Support of the Development of Commerce and Industry in France). Société Générale is often nicknamed SocGen in the international financial world. The long term debt of the group is currently ranked AA by S&P, Aa2 by Moody's and AA- by Fitch. The 2007 financial results were sharply lower, affected by depreciations and a fraud of 4.9 billion.


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June 2008

Portal:Business and economics/Selected article/June 2008


May 2008
Joseph Stiglitz

Joseph Eugene "Joe" Stiglitz (born February 9, 1943) is an American economist and a member of the Columbia University faculty. He is a recipient of the John Bates Clark Medal (1979) and the The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel (2001). Former Senior Vice President and Chief Economist of the World Bank, he is known for his critical view of globalization, free-market economists (whom he calls "free market fundamentalists") and some international institutions like the International Monetary Fund and the World Bank. In 2000 Stiglitz founded the Initiative for Policy Dialogue (IPD), a think tank on international development based at Columbia University. Since 2001 he has been a member of the Columbia faculty, and has held the rank of University Professor since 2003. He also chairs the University of Manchester's Brooks World Poverty Institute and is a member of the Pontifical Academy of Social Sciences. Stiglitz is among the ten most cited economists in the world, as of 2008.


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April 2008
Joseph Stiglitz

Joseph Eugene "Joe" Stiglitz (born February 9, 1943) is an American economist and a member of the Columbia University faculty. He is a recipient of the John Bates Clark Medal (1979) and the The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel (2001). Former Senior Vice President and Chief Economist of the World Bank, he is known for his critical view of globalization, free-market economists (whom he calls "free market fundamentalists") and some international institutions like the International Monetary Fund and the World Bank. In 2000 Stiglitz founded the Initiative for Policy Dialogue (IPD), a think tank on international development based at Columbia University. Since 2001 he has been a member of the Columbia faculty, and has held the rank of University Professor since 2003. He also chairs the University of Manchester's Brooks World Poverty Institute and is a member of the Pontifical Academy of Social Sciences. Stiglitz is among the ten most cited economists in the world, as of 2008.


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March 2008
Leonid Hurwicz

Leonid "Leo" Hurwicz (born August 21, 1917) is an American economist and mathematician. He is known as the researcher who originated incentive compatibility and mechanism design, which are used in economics, social science and political science to achieve desired outcomes. Interactions of individuals and institutions, markets and trade are analyzed and understood today using the models Hurwicz developed. A man of commanding intellect, Hurwicz is described as calm and humble. He loves to teach and to connect with people and is admired for thinking of others as equals. Hurwicz is Regents’ Professor of Economics (Emeritus) at the University of Minnesota. He is among the first economists to recognize the value of game theory and is a pioneer in its application.Hurwicz shared the 2007 Nobel Memorial Prize in Economic Sciences with Eric Maskin and Roger Myerson for their work on mechanism design.

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February 2008

Bank of China (Hong Kong) Limited (BOCHK, 中國銀行(香港)有限公司) is the second-largest commercial banking group in Hong Kong in terms of assets and customer deposits, with more than 300 branches in Hong Kong. It was established on October 1, 2001 from a merger of 12 subsidiaries and associates of the Bank of China in Hong Kong, and listed on the Hong Kong Stock Exchange in October 2002. As of the end of 2003, the bank had HK$763 billion in assets and earned net profit of HK$8 billion in 2003.

BOCHK is one of the three banks which issue banknotes for Hong Kong, the biggest member and a founder of the JETCO ATM and payment system, and the designated clearing bank in Hong Kong for transactions involving the renminbi, Mainland China's currency. It is legally separate from its parent, Bank of China (BOC), although they maintain close relations in management and administration and cooperate in several areas including reselling BOC's insurance and securities services. It also shares its Hong Kong headquarters, the Bank of China Tower, with its parent; completed in 1988, this was the first building outside of North America to exceed 1,000 feet (300 m).

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January 2008
Microsoft sign at headquarters in Redmond, Washington

Microsoft Corporation, or often just MS, is an American multinational computer technology corporation with 79,000 employees in 102 countries and global annual revenue of US $51.12 billion as of 2007. It develops, manufactures, licenses and supports a wide range of software products for computing devices. Headquartered in Redmond, Washington, USA, its best selling products are the Microsoft Windows operating system and the Microsoft Office suite of productivity software. These products have prominent positions in the desktop computer market, with market share estimates as high as 90% or more as of 2003 for Microsoft Office and 2006 for Microsoft Windows, in line with Bill Gates's vision "to get a workstation running our software onto every desk and eventually in every home".

Founded to develop and sell BASIC interpreters for the Altair 8800, Microsoft rose to dominate the home computer operating system market with MS-DOS in the mid-1980s. The company released an initial public offering (IPO) in the stock market, which, due to the ensuing rise of the stock price, has made four billionaires and an estimated 12,000 millionaires from Microsoft employees. Throughout its history the company has been the target of criticism for various reasons, including monopolistic business practices—both the U.S. Justice Department and the European Commission, among others, brought Microsoft to court for antitrust violations and software bundling.

Microsoft has footholds in other markets besides operating systems and office suites, with assets such as the MSNBC cable television network, the MSN Internet portal, and the Microsoft Encarta multimedia encyclopedia. The company also markets both computer hardware products such as the Microsoft mouse and home entertainment products such as the Xbox, Xbox 360, Zune and MSN TV. Known for what is generally described as a developer-centric business culture, Microsoft has historically given customer support over Usenet newsgroups and the World Wide Web, and awards Microsoft MVP status to volunteers who are deemed helpful in assisting the company's customers.

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December 2007
Ronald Reagan, the US president from which Reaganomics derives its name

Reaganomics (a portmanteau of "Reagan" and "economics") refers to both the real economic policies and the associate politicking of the Reagan era. The four pillars of Reagan's economic policy were to 1) reduce the growth of government spending, 2) reduce marginal tax rates on income from labor and capital, 3) reduce regulation, and (4) control the money supply to reduce inflation (sound money policy). In attempting to cut back on domestic spending while lowering taxes, Reagan's approach was a departure from his immediate predecessors.

Though reduced government spending is touted as a core element of Reaganomics, Reagan actually racked up a huge debt. Bush avoided the issue during his presidency, and lost reelection in large part on economic grounds. Only when Clinton was elected, was Greenspan's advice finally heeded, and efforts made to pay down the debt; by the end of the Clinton era that debt was largely paid off, and Greenspan was contending with the possibility of surpluses in the years to come.

Reaganomics had its roots in two of Reagan's campaign promises: lower taxes and a smaller government. Reagan reduced income tax rates, with the largest rate reductions on the highest incomes; in a time of battling inflation, Reagan raised deficit spending to its highest level (relative to GDP) since World War II. As a result, there has been endless debate on whether the economic trends of the Reagan years actually came from the free market, or from government stimulus of the kind advocated by Keynesian theorists.

With the Tax Reform Act of 1986, Reagan and Congress sought to broaden the tax base and reduce perceived tax favoritism. In 1983, Democrats Bill Bradley and Dick Gephardt had offered a proposal to clean up/broaden the tax base; in 1984 Reagan had the Treasury Department produce its own plan. The eventual bipartisan 1986 act aimed to be revenue-neutral: while it reduced the top marginal rate, it also partially "cleaned up" the tax base by curbing tax loopholes, preferences, and exceptions, thus raising the effective tax on activities previously specially favored by the code. Economists of most affiliations favor cleaning up the tax code, since tax preferences and exceptions "distort" economic decisions.

The Reagan era was marked by cuts to social programs, and large-scale deficit spending on the military. Nobel Prize-winning economist Milton Friedman has pointed to the number of pages added to the Federal Register each year as evidence of Reagan's anti-regulation presidency (the Register records the rules and regulations that federal agencies issue per year). The number of pages added to the Register each year declined sharply at the start of the Ronald Reagan presidency breaking a steady and sharp increase since 1960. The increase in the number of pages added per year resumed an upward, though less steep, trend after Reagan left office. In contrast, the number of pages being added each year increased under Ford, Carter, George H.W. Bush, Clinton, and others.

The question of how much of the overall trend of deregulation can be credited to Reagan remains contentious. The economists Raghuram Rajan and Luigi Zingales point out that many of the major deregulation efforts had either taken place or begun before Reagan (note the deregulation of airlines and trucking under Carter, and the beginning of deregulatory reform in railroads, telephones, natural gas, and banking). They argue for this and other reasons that "the move toward markets preceded the leader [Reagan] who is seen as one of their saviors." Economist William Niskanen, a member of Reagan's Council of Economic Advisers and later chairman of the libertarian Cato Institute, writes that deregulation had the "lowest priority" of the items on the Reagan agenda and that Reagan "failed to sustain the momentum for deregulation initiated in the 1970s." The apparent contradiction with Friedman's data may be resolved by seeing Niskanen as referring to statutory deregulation and Friedman to administrative deregulation. In sum, a large study by economists Paul Joskow and Roger Noll concludes that the changes in economic regulation "simply do not reflect a sudden ideological change in federal executive branch views....many of the significant changes in economic regulation began during the Carter administration and were initiated by liberal Democrats.... it is not particularly productive to refer to a generic deregulation movement or to think of it as a consequence of the election of Ronald Reagan."

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November 2007

In economics, hyperinflation is inflation that is "out of control," a condition in which prices increase rapidly as a currency loses its value. No precise definition of hyperinflation is universally accepted. One simple definition requires a monthly inflation rate of 20 or 30% or more. In informal usage the term is often applied to much lower rates.

The definition used by most economists is "an inflationary cycle without any tendency toward equilibrium." A vicious circle is created in which more and more inflation is created with each iteration of the cycle. Although there is a great deal of debate about the root causes of hyperinflation, it becomes visible when there is an unchecked increase in the money supply or drastic debasement of coinage, and is often associated with wars (or their aftermath), economic depressions, and political or social upheavals.

The main cause of hyperinflation is a massive imbalance between the supply and demand of a certain currency or type of money, usually due to a complete loss of confidence in the currency similar to a bank run. First, the enactment of legal tender laws prevent discounting the value of paper money vis-a vis gold, silver or a hard currency, by forcing acceptance of a paper money which lacks intrinsic value. If the entity responsible for printing a currency then promotes excessive money printing, with other factors contributing a reinforcing effect, hyperinflation usually occurs. Often the body responsible for printing the currency cannot physically print paper currency faster than the rate at which it is devaluing, thus neutralising their attempts to stimulate the economy.

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October 2007

A Bank run (also known as a run on the bank) is a type of financial crisis. It is a panic which occurs when a large number of customers of a bank fear it is insolvent and withdraw their deposits.

Northern Rock bank run on the morning of 14 September 2007.

A run on the bank begins when the public begins to suspect that a bank may become insolvent. As a result, individuals begin to withdraw their savings. This action can destabilize the bank to the point where it may in fact become insolvent. Banks retain only a fraction of their deposits as cash (see fractional-reserve banking): the remainder is issued as loans. As a result, no bank has enough reserves on hand to cope with more than the fraction of deposits being taken out at once, and will 'call in' the short term deposits itself has made. This can cause a shortage of Market liquidity in the short term money market.

As a bank run progresses, it generates its own momentum. As more people withdraw their deposits, the likelihood of default increases, so other individuals have more incentive to withdraw their own deposits. If many or most banks were to suffer runs at the same time, then the resulting chain of bankruptcies can cause a long economic recession.

To prevent bank runs, Central banks can prevent financial institutions from failing by:

  • Deposit insurance systems insure each depositer up to a certain amount, therefore the depositers' savings are protected even if the bank fails. This removes the incentive to withdraw deposits simply because others are withdrawing theirs if consumers trust the insurance system.
  • Central banks act as a lender of last resort. To prevent a bank run, the Central Bank guarantees that it will make short-term, high-interest loans to banks, to ensure that, if they remain economically viable, they will always have enough liquidity to honour their deposits.
  • Reserve ratios and Tier 1 capital thresholds both limit the proportion of deposits which a bank can loan out.
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September 2007

The General Theory of Employment, Interest, and Money is a book written by the English economist John Maynard Keynes. The book, generally considered to be the magnum opus of the English economist, is largely credited for creating the terminology of modern macro-economics. Published in February 1936 it ushered in a revolution, commonly referred to as the "Keynesian Revolution", in the way economists thought and especially in terms of the feasibility and wisdom of public sector management and intervention towards the aggregate level of demand in the economy. Regarded widely as the cornerstone of Keynesian thought, the book attacked the established classical economics based upon laissez-faire, and put forward important theories on the consumption function, the multiplier principle, marginal efficiency of capital and liquidity preference.

In Keynes' book Essays in Persuasion he looked back on his frustrating attempts to influence public opinion in the West during the Great Depression of the early nineteen thirties. Part of his frustration is, as he concedes, that "the theory of aggregated production, which is the point of the following book, nevertheless can be much easier adapted to the conditions of a totalitarian state [eines totalen Staates] than the theory of production and distribution of a given production put forth under conditions of free competition and a large degree of laissez-faire." Thus, the General Theory represented Keynes's attempt to shift opinion by altering the framework of thought in macro-economics.

Over the seven decades since its publishing in the mid-1930s, the General Theory has shaped the views of politicians, businessmen and administrators around the world, where unbeknown to them, policies such as tax cuts to create jobs by putting spending money in people's pockets is the direct result of Keynesian doctrine. Briefly, the General Theory argued that the level of employment in a modern economy was determined by three factors: the marginal propensity to consume (the percentage of any increase in the income that people chose to spend on goods and services), the marginal efficiency of capital (the cut-off rate used to see whether investments are worthy, which are dependent on anticipated rates of return) and the rate of interest.

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August 2007

An Inquiry into the Nature and Causes of the Wealth of Nations is the magnum opus of the Scottish economist Adam Smith, published on March 9, 1776 during the Scottish Enlightenment. It is a clearly written account of political economy at the dawn of the Industrial Revolution, and is widely considered to be the first modern work in the field of economics. The work is also the first comprehensive defense of free market policies. It is broken down into five books between two volumes. The Wealth of Nations was written for the average educated individual of the 18th century rather than for specialists and mathematicians. There are three main concepts that Smith expands upon in this work that form the foundation of free market economics: The Division of Labor, The Pursuit of Self Interest, and The Freedom of Trade.

The Wealth of Nations was published in 1776, during the Age of Enlightenment. It influenced not only authors and economists, but governments and organisations. For example, Alexander Hamilton was influenced in part by The Wealth of Nations to write his Report on Manufactures, in which he argued against many of Smith's policies. Interestingly, Hamilton based much of this report on the ideas of Jean-Baptiste Colbert, and it was, in part, to Colbert's ideas that Smith wished to respond with The Wealth of Nations. Many other authors were influenced by the book and used it as a starting point in their own work, including Jean-Baptiste Say, David Ricardo, Thomas Malthus and, later, Karl Marx and Ludwig von Mises. The Russian national poet Aleksandr Pushkin refers to The Wealth of Nations in his 1833 verse-novel Eugene Onegin.

Irrespective of historical influence, however, The Wealth of Nations represented a clear leap forward in the field of economics, similar to Sir Isaac Newton's Principia Mathematica for physics or Antoine Lavoisier's Traité Élémentaire de Chimie for chemistry. The Wealth of Nations is also important in a Scottish linguistic context on account of the fact the book is written in English and not in Scots Language, a somewhat rare occurrence for the time.

Smith addresses in The Wealth of Nations a problem that was torturing the best economic minds of his day. This problem was rooted in the means by which objects are valued. The two predominant theories of value in Smith's time were the so-called "Practical Theory of Value" and the labor theory of value, as delineated later by David Ricardo.

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July 2007

An Inquiry into the Nature and Causes of the Wealth of Nations is the magnum opus of the Scottish economist Adam Smith, published on March 9, 1776 during the Scottish Enlightenment. It is a clearly written account of political economy at the dawn of the Industrial Revolution, and is widely considered to be the first modern work in the field of economics. The work is also the first comprehensive defense of free market policies. It is broken down into five books between two volumes. The Wealth of Nations was written for the average educated individual of the 18th century rather than for specialists and mathematicians. There are three main concepts that Smith expands upon in this work that form the foundation of free market economics: The Division of Labor, The Pursuit of Self Interest, and The Freedom of Trade.

The Wealth of Nations was published in 1776, during the Age of Enlightenment. It influenced not only authors and economists, but governments and organisations. For example, Alexander Hamilton was influenced in part by The Wealth of Nations to write his Report on Manufactures, in which he argued against many of Smith's policies. Interestingly, Hamilton based much of this report on the ideas of Jean-Baptiste Colbert, and it was, in part, to Colbert's ideas that Smith wished to respond with The Wealth of Nations. Many other authors were influenced by the book and used it as a starting point in their own work, including Jean-Baptiste Say, David Ricardo, Thomas Malthus and, later, Karl Marx and Ludwig von Mises. The Russian national poet Aleksandr Pushkin refers to The Wealth of Nations in his 1833 verse-novel Eugene Onegin.

Irrespective of historical influence, however, The Wealth of Nations represented a clear leap forward in the field of economics, similar to Sir Isaac Newton's Principia Mathematica for physics or Antoine Lavoisier's Traité Élémentaire de Chimie for chemistry. The Wealth of Nations is also important in a Scottish linguistic context on account of the fact the book is written in English and not in Scots Language, a somewhat rare occurrence for the time.

Smith addresses in The Wealth of Nations a problem that was torturing the best economic minds of his day. This problem was rooted in the means by which objects are valued. The two predominant theories of value in Smith's time were the so-called "Practical Theory of Value" and the labor theory of value, as delineated later by David Ricardo.

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June 2007

John Stuart Mill (20 May 1806 – 8 May 1873) was a British philosopher, political economist and Member of Parliament, was an influential liberal thinker of the 19th century. He was an advocate of utilitarianism, the ethical theory that was systemized by his godfather, Jeremy Bentham, but adapted to German romanticism. It is usually suggested that Mill is an advocate of negative liberty. However, this has been contested by many academics, notably Dr. David Walker of Newcastle University in England. The canonical statement of Mill's Utilitarianism can be found in Utilitarianism. This philosophy has a long tradition, although Mill's account is primarily influenced by Jeremy Bentham, and Mill's father James Mill. Mill’s famous formulation of Utilitarianism is known as the "greatest happiness principle." It holds that one must always act so as to produce the greatest happiness for the greatest number of people. One of Mill's major contributions to Utilitarianism is his argument for the qualitative separation of pleasures. Bentham treats all forms of happiness as equal, whereas Mill argues that intellectual and moral pleasures are superior to more physical forms of pleasure. Mill distinguishes between "happiness" and "contentment," claiming that the former is of higher value than the latter, a belief wittily encapsulated in his statement that it is better to be Socrates dissatisfied than a fool satisfied.

Mill furthermore dealt with one of the prime problems associated with utilitarianism, that of schadenfreude. Detractors of utilitarianism argued, among other objections, that if enough people hated another person sufficiently that simply reducing the happiness of the object of their hatred would cause them pleasure, it would be incumbent upon a utilitarian society to aid them in harming the individual. Mill argued that, in order to have such an attitude of malice, a citizen would have to value his own pleasure over that of another, and so society is in no way obligated to indulge him, and, to the contrary, is fully permitted to suppress his actions.

Mill's early economic philosophy was one of free markets. However, he accepted interventions in the economy, such as a tax on alcohol, if there were sufficient utilitarian grounds. He also accepted the principle of legislative intervention for the purpose of animal welfare. Mill believed that "equality of taxation" meant "equality of sacrifice" and that progressive taxation penalised those who worked harder and saved more and was therefore "a mild form of robbery".

Mill's Principles of Political Economy, first published in 1848, was one of the most widely read of all books on economics in the period. As Adam Smith's Wealth of Nations had during an earlier period, Mill's Principles dominated economics teaching. (In the case of Oxford University it was the standard text until 1919, probably because the text that replaced it was written by Cambridge's Alfred Marshall).


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May 2007
Ludwig von Mises's family's crest

The Austrian School, also known as “the Vienna School” and as “the Psychological School”, is a school of economic thought that advocates adherence to strict methodological individualism. As a result Austrians hold that the only valid economic theory is logically derived from basic principles of human action. Alongside the formal approach to theory, often called praxeology, the school has traditionally advocated an interpretive approach to history. The praxeological method allows for the discovery of economic laws valid for all human action, while the interpretive approach addresses specific historical events.

This Aristotelian/rationalist approach differs both from the currently dominant Platonic/positivist approach of contemporary neo-classical economics and the once dominant historical approach of the German historical school and the American institutionalists. While the praxeological method differs from the current method advocated by the majority of contemporary economists, the Austrian method is essentially identical with the traditional approach to economics used by the British classical economists, the early continental economists, and the Late Scholastics. The Austrian methodology is, therefore, a continuation of a long line of economic thought stretching from the 15th century to the modern era and including such major economists as Richard Cantillon, David Hume, A.R.J. Turgot, Adam Smith, Jean-Baptiste Say, David Ricardo, Nassau Senior, John Elliott Cairnes, and Claude Frédéric Bastiat.

The most famous Austrian adherents are Carl Menger, Eugen von Böhm-Bawerk, Friedrich von Wieser, Ludwig von Mises, Friedrich Hayek, Joseph Schumpeter, Gottfried von Haberler, Murray Rothbard, Israel Kirzner, George Reisman, Henry Hazlitt, and Hans-Hermann Hoppe. While often controversial, and standing to some extent outside of the mainstream of neoclassical theory — as well as being staunchly opposed to much of Keynes' theory and its results — the Austrian School has been widely influential because of its emphasis on the creative phase (i.e. the time element) of economic productivity and its questioning of the basis of the behavioral theory underlying neoclassical economics.

Because many of the policy recommendations of Austrian theorists call for small government, strict protection of private property, and support for individualism in general, they are often cited by laissez-faire liberal, libertarian, and Objectivist groups for support, although Austrian School economists, like Ludwig von Mises, insist that praxeology must be value-free. They do not answer the question "should this policy be implemented?", but rather "if this policy is implemented, will it have the effects you intend?".

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April 2007
Ludwig von Mises

The Austrian School, also known as “the Vienna School” and as “the Psychological School”, is a school of economic thought that advocates adherence to strict methodological individualism. As a result Austrians hold that the only valid economic theory is logically derived from basic principles of human action. Alongside the formal approach to theory, often called praxeology, the school has traditionally advocated an interpretive approach to history. The praxeological method allows for the discovery of economic laws valid for all human action, while the interpretive approach addresses specific historical events.

This Aristotelian/rationalist approach differs both from the currently dominant Platonic/positivist approach of contemporary neo-classical economics and the once dominant historical approach of the German historical school and the American institutionalists. While the praxeological method differs from the current method advocated by the majority of contemporary economists, the Austrian method is essentially identical with the traditional approach to economics used by the British classical economists, the early continental economists, and the Late Scholastics. The Austrian methodology is, therefore, a continuation of a long line of economic thought stretching from the 15th century to the modern era and including such major economists as Richard Cantillon, David Hume, A.R.J. Turgot, Adam Smith, Jean-Baptiste Say, David Ricardo, Nassau Senior, John Elliott Cairnes, and Claude Frédéric Bastiat.

The most famous Austrian adherents are Carl Menger, Eugen von Böhm-Bawerk, Friedrich von Wieser, Ludwig von Mises (pictured), Friedrich Hayek, Joseph Schumpeter, Gottfried von Haberler, Murray Rothbard, Israel Kirzner, George Reisman, Henry Hazlitt, and Hans-Hermann Hoppe. While often controversial, and standing to some extent outside of the mainstream of neoclassical theory — as well as being staunchly opposed to much of Keynes' theory and its results — the Austrian School has been widely influential because of its emphasis on the creative phase (i.e. the time element) of economic productivity and its questioning of the basis of the behavioral theory underlying neoclassical economics.

Because many of the policy recommendations of Austrian theorists call for small government, strict protection of private property, and support for individualism in general, they are often cited by laissez-faire liberal, libertarian, and Objectivist groups for support, although Austrian School economists, like Ludwig von Mises, insist that praxeology must be value-free. They do not answer the question "should this policy be implemented?", but rather "if this policy is implemented, will it have the effects you intend?".

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March 2007
Milton Friedman

The Chicago school of economics is a school of thought favoring the ideas of free-market economics, and rational expectations that have been put in practice and disseminated through the teaching of the University of Chicago. The leaders were Nobel laureates George Stigler and Milton Friedman (pictured).

It is associated with neoclassical price theory and free market libertarianism, refutation and rejection of Keynesianism in favor of monetarism (until the 1980s, when it turned to rational expectations), and rejection of regulation of business in favor of laissez-faire. In terms of methodology the stress is on "positive economics"--that is, empirically based studies using statistics, with less stress on theory and more on data. The school is noted for its very wide range of topics, from regulation to marriage, slavery and demography, that it studies.

The term was coined in the 1950s to refer to economists teaching in the Economics Department at the University of Chicago, and closely related academic areas at the University such as the Graduate School of Business and the Law School. They met together in frequent intense discussions that helped set a group outlook on economic issues, based on price theory.

The school of thought is not the same as the Department of Economics at the University of Chicago, widely considered one of the world’s foremost economics departments, having fielded more Nobel Prize winners and John Bates Clark medalists in economics than any other university. Only some, but not a majority, of the professors in the economics department are considered part of the school of thought.

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February 2007

The Chicago school of economics is a school of thought favoring free-market economics practiced at and disseminated from the University of Chicago. The leaders were Nobel laureates George Stigler and Milton Friedman (pictured).

It is associated with neoclassical price theory and free market libertarianism, refutation and rejection of Keynesianism in favor of monetarism (until the 1980s, when it turned to rational expectations), and rejection of regulation of business in favor of laissez-faire. In terms of methodology the stress is on "positive economics"--that is, empirically based studies using statistics, with less stress on theory and more on data. The school is noted for its very wide range of topics, from regulation to marriage, slavery and demography, that it studies.

The term was coined in the 1950s to refer to economists teaching in the Economics Department at the University of Chicago, and closely related academic areas at the University such as the Graduate School of Business and the Law School. They met together in frequent intense discussions that helped set a group outlook on economic issues, based on price theory.

The school of thought is not the same as the Department of Economics at the University of Chicago, widely considered one of the world’s foremost economics departments, having fielded more Nobel Prize winners and John Bates Clark medalists in economics than any other university. Only some, but not a majority, of the professors in the economics department are considered part of the school of thought.

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January 1, 2007 - January 31, 2007
John Maynard Keynes appeared on December 31, 1965 edition of TIME magazine.

Keynesian economics (pronounced /ˈkeɪnzjən/), also called Keynesianism, or Keynesian Theory, is an economic theory based on the ideas of 20th century British economist John Maynard Keynes (pictured). Keynesian economics promotes a mixed economy, where both the state and the private sector play an important role. Keynesian economics differs markedly from laissez-faire economics (economic theory based on the belief that markets and the private sector operate well on their own, without state intervention).

In Keynes's theory, general (macro-level) trends can overwhelm the micro-level behavior of individuals. Instead of the economic process being based on continuous improvement in potential output, as most classical economists had believed from the late 1700s on, Keynes asserted the importance of aggregate demand for goods as the driving factor of the economy, especially in periods of downturn. From this he argued that government policies could be used to promote demand at a macro level, to fight high unemployment and deflation of the sort seen during the 1930s. A central conclusion of Keynesian economics is that there is no strong automatic tendency for output and employment to move toward full employment levels. This conclusion conflicts with the tenets of classical economics, and those schools, such as supply-side economics or the Austrian School, which assume a general tendency towards a welcome equilibrium in a restrained money-creating economy. In neoclassical economics, which combines Keynesian macro concepts with a micro foundation, the conditions of General equilibrium allow for price adjustment to achieve this goal.


November 28, 2006 - December 31, 2006
John D. Rockefeller

John Davison Rockefeller, Sr. (July 8, 1839–May 23, 1937) was an American industrialist and philanthropist who played a pivotal role in the establishment of the oil industry, and defined the structure of modern philanthropy. In 1870, Rockefeller helped found the Standard Oil company. Over a forty-year period, Rockefeller built Standard Oil into the largest and most profitable company in the world, and became the world's richest man.

His business career was controversial. He was bitterly attacked by muckraking journalists; his company was convicted in the Federal Court of monopolistic practices and broken up in 1911. He gave up active management of Standard Oil in the late 1890s, while keeping a large fraction of the shares. He spent the last forty years of his life focused on philanthropic pursuits, primarily related to education and public health. He donated most of his wealth using multiple foundations run by experts. He was a devout Northern Baptist and supported many church-based institutions throughout his life.

Rockefeller may ultimately be remembered simply for the raw size of his wealth. In 1902, an audit showed Rockefeller was worth about $200 million, compared to the total national wealth that year of $101 billion. His wealth grew significantly after as the demand for gasoline soared, eventually reaching about $900 million, including significant interests in banking, shipping, mining, railroads, and other industries. By the time of his death in 1937, Rockefeller's remaining fortune, largely tied up in permanent family trusts, was estimated at $1.4 billion. Rockefeller's net worth over the last decades of his life would easily place him among the list of wealthiest persons in history. As a percentage of the United States economy, no other American fortune—including Bill Gates or Sam Walton—would even come close.


October 21, 2006 - November 27, 2006
Green politics

Green economics is an approach to economics in which the economy is considered to be a component of and dependent upon the natural world within which it resides and of which is it considered a part. It also takes the widest possible view of stakeholders of a transaction to include impacts, to nature, non human species, the planet, earth sciences, the biosphere. An, holistic approach to the subject is typical, such that economic ideas incorporate learning from other disciplines in a true transdisciplinary fashion, and important theories from feminist economics,post modernism, critical theory, ecology, international relations and peace, deep ecology, animal rights, social and environmental justice and the anti- globalisation in some cases and eco efficiency and participation in others as well as some localisation theories. Green Economics is different from but builds on some aspects of environmental economics and ecological economics.

Green Economics is based on three axioms:

  1. It is impossible to expand forever into a finite space.
  2. It is impossible to take forever from a finite resource.
  3. Everything on the surface of Earth is interconnected.

What defines green economists most clearly is the emphasis on the ecosystem as the right starting point for economics. This is in direct opposition to the neo-classical approach, which classifies the ecosystem as an "externality".

Subsidiary characteristics of green economics may include rejection of all analyses of factors of production or means of production that fail to clearly and fundamentally distinguish between living (nature, persons) and non-living (financial, social, instructional, infrastructural) roles in a productive process. Some have detailed critiques of "Fordism" (after Henry Ford) and "productivism", as best developed by Alain Lipietz of the French Greens.

All green economists regard "economic growth" as a delusion, since it contradicts the first Axiom (above). Growthism is an ideology, which disrupts and destroys growth in the life support capacity of the natural ecosystem: air and water filtering, food production, fiber growth. Green economists often characterize their work as "social ecology" and some may employ the Marxist analysis of means of production.


September 14, 2006 - October 21, 2006
Celtic Tiger

The Celtic Tiger is a nickname for the Republic of Ireland during its period of rapid economic growth between the 1990s and 2001 or 2002. The term is an analogy to the nickname East Asian Tigers applied to South Korea, Singapore, Hong Kong, Taiwan and other countries of East Asia during their period of rapid growth in the 1980s and 1990s. The Celtic Tiger or Celtic Tiger economy is often also called the The Boom or Ireland's Economic Miracle. Sometimes the Celtic Tiger moniker is also used when referring to continued or renewed Irish economic prowess subsequent to the aforesaid time period.

The original Celtic Tiger occurred in the mid-1990s and lasted until the worldwide economic downturn of 2001. During this time, the Irish economy grew by 5 to 6 percent annually, dramatically raising Irish living standards to equal and eventually surpass those of many states in the rest of Western Europe.

Although there are many causes for the Celtic Tiger, many economists give credit for Ireland's growth to a low corporate taxation rate (10 to 12.5 percent throughout the late 1990s) and subsidies called transfer payments from the more developed members of the European Union like France and Germany that were as high as 7% of gross national product (GNP).

As with any economic boom, there are consequences. Such were examples of problems that arose from Ireland's boom:

  • Disposable income soared to record levels enabling a huge rise in consumer spending. It became a common sight to see expensive cars and designer labels around the nation's towns and cities.
  • Unemployment fell from 18% in the late 1980s to 4.9% by the end of the boom and average industrial wages grew at one of the highest rates in Europe.
  • Inflation regularly brushed 5% per annum, pushing Irish prices up to match those of the Nordic Europe. Groceries were particularly hard hit, prices in chain stores in the Republic of Ireland were sometimes up to twice those in Northern Ireland
  • Public debt was dramatically cut (it stood at about 34% of GDP by the end of 2001) to become one of Europe's lowest, enabling public spending to double without any significant increase in taxation levels.
  • A large investment in modernising Irish infrastructure and city streetscapes resulted from the new wealth - the National Development Plan led to large investments in road infrastructure and new transport services came on stream such as the Luas, the Dublin Port Tunnel and the extension of the Cork Suburban Rail. Local authorities were able to take the initiative to build new monuments such as the Spire of Dublin and enhance street appearance with repaving, new benches, trees, bins etc.

May 31, 2006 to September 14, 2006

Scientific management or Taylorism is the name of the approach to management and industrial and organizational psychology initiated by Frederick Winslow Taylor in his 1911 monograph The Principles of Scientific Management. (Online version ).

'Taylorism is often mentioned along with Fordism, because it was closely associated with mass production methods in manufacturing factories. Taylor's own name for his approach was scientific management'. This sort of task-oriented optimization of work tasks is nearly ubiquitous today in menial industries, most notably in assembly lines and fast-food restaurants.' His arguments began from his observation that, in general, workers in repetitive jobs work at the slowest rate that goes unpunished. This slow rate of work (which he called "soldiering", but might nowadays be termed "loafing" or "malingering" as a typical part of a day's work), he opined, was a combination of the inherent laziness of people and the observation that, when paid the same amount, workers will tend to do the amount of work the slowest among them does. He therefore proposed that the work practice that had been developed in most work environments was crafted, intentionally or unintentionally, to be very inefficient in its execution. From this he posited that there was one best method for performing a particular task, and that if it were taught to workers, their productivity would go up.

While his principles have a certain logic, most applications of it fails to account for two inherent difficulties:

  • It ignores individual differences: the most efficient way of working for one person may be inefficient for another;
  • It ignores the fact that the economic interests of workers and management are rarely identical, so that both the measurement processes and the retraining required by Taylor's methods would frequently be resented and sometimes sabotaged by the workforce.

May 1, 2006 - May 31, 2006

Generally, Risk Management is the process of measuring, or assessing risk and then developing strategies to manage the risk. In general, the strategies employed include transferring the risk to another party, avoiding the risk, reducing the negative effect of the risk, and accepting some or all of the consequences of a particular risk. Traditional risk management focuses on risks stemming from physical or legal causes (e.g. natural disasters or fires, accidents, death, and lawsuits). Financial risk management, on the other hand, focuses on risks that can be managed using traded financial instruments. Intangible risk management focuses on the risks associated with human capital, such as knowledge risk, relationship risk, and engagement-process risk. Regardless of the type of risk management, all large corporations have risk management teams and small groups and corporations practice informal, if not formal, risk management.

In ideal risk management, a prioritization process is followed whereby the risks with the greatest loss and the greatest probability of occurring are handled first, and risks with lower probability of occurrence and lower loss are handled later. In practice the process can be very difficult, and balancing between risks with a high probability of occurrence but lower loss vs. a risk with high loss but lower probability of occurrence can often be mishandled.


October 31, 2005 - May 1, 2006

In economics, the unit of account is a unit of measurement of market value. Goods for sale in a market are priced using a unit of account. In this manner the value is measured by the seller and expressed to the buyer. Contracts of credit or debt are denominated in a unit of account. In this manner the agreed value of the debt is measured, and the method of settling the debt is defined.

Whilst all market participants are free to use any unit of account that they prefer, most markets have only a few widely accepted units of account. For example in Japan the most universal unit of account is the yen.

It is generally assumed that a good unit of account is one that is stable. Just as a measuring stick used to measure length should itself be stable in length so to a unit of account used to measure value should itself be stable in value. However there are schools of economic thought that challenge this view point.

While it is most common to think of accounts in currency, it is possible to hold accounts in gold (as e-gold does) or options in various other commodities.


August 29, 2005 - October 31, 2005

Foreign direct investment (FDI) is the movement of capital across national frontiers in a manner that grants the investor control over the acquired asset. Thus it is distinct from portfolio investment which may cross borders, but does not offer such control. Firms which source FDI are known as ‘multinational enterprises’ (MNEs). In this case control is defined as owning 10% or greater of the ordinary shares of an incorporated firm, having 10% or more of the voting power for an unincorporated firm or development of a greenfield branch plant that is a permanent establishment of the originating firm.

In the years after the Second World War global FDI was dominated by the United States, as much of the world recovered from the destruction wrought by the conflict. The U.S. accounted for around three-quarters of new FDI (including reinvested profits) between 1945 and 1960. Since that time FDI has spread to become a truly global phenomenon, no longer the exclusive preserve of OECD countries. FDI has grown in importance in the global economy with FDI stocks now constituting over 20% of global GDP.


August 15, 2005 - August 28, 2005
P.C. Mahalanobis

Prasanta Chandra Mahalanobis (June 29, 1893–June 28, 1972) was an Indian scientist and applied statistician. He is best known for the Mahalanobis distance, a statistical measure. He did pioneering work on anthropometric variation in India.

His most important contributions are related to large scale sample surveys. He introduced the concept of pilot surveys and advocated the usefulness of sampling methods. He founded the Indian Statistical Institute on 17 December, 1931.

In later life, he contributed prominently to newly independent India's five-year plans starting from the second. His variant of Wassily Leontief's Input-output model was employed in the second and later plans to work towards rapid industrialisation of India and with his colleagues at his institute, he played a key role in developing the required statistical infrastructure.

He received one of the highest civilian awards Padma Vibhushan from the Government of India for his contribution to science and services to the country. He died on Jun 28, 1972, a day before his seventy-ninth birthday.


August 9, 2005 - August 15, 2005

In many countries, the Yellow Pages refers to a telephone directory for businesses organized by the category of product or service. As the name suggests, they are usually printed on yellow paper.

Yellow Pages directories are usually published annually and distributed for free to all residences and businesses within a given coverage area. The majority of listings are in plain small black text. Yellow Pages publishers make their profits by selling special value-added features to businesses such as a larger font size for their listing, or an advertisement box next to the listings in a category. Since the mid-1990s, there has been a trend among Yellow Pages publishers to add four-color printing for some advertisements.

Many publishers now make their listings available on the World Wide Web, on "Yellow Pages" Web sites.

The information contained in the Yellow Pages is essentially a commodity, so publishers often engage in product differentiation tactics like bragging that their listings are more comprehensive or up-to-date. In 1999, a new tactic was pioneered by France Telecom's Pages Jaunes, which dispatched photographers to record nearly every possible view in front of nearly every address in certain French cities. Thus, French Yellow Pages users can see a photograph of a business along with its phone number and street address. In 2004, the search engine A9.com added a similar feature for many cities in the United States when it launched its Yellow Pages feature.


August 6-9, 2005
An indifference map

In microeconomics, an indifference curve is a graph showing combinations of two goods to which an economic agent (such as a consumer or firm) is indifferent, that is, it has no preference for one combination over the other. They are used to analyse the choices of economic agents.

For example, if a consumer was equally satisfied with 1 apple and 4 bananas, 2 apples and 2 bananas, or 5 apples and 1 banana, these combinations would all lie on the same indifference curve.

The theory of indifference curves was developed by Edgeworth, Pareto and others in the first part of the 20th century. The theory was developed so that analysis of economic choices could be based upon preferences which can be observed and compared (ordinal utility), rather than the older concept of utility which was based on the unrealistic assumption that the satisfaction derived from economic choices could be measured (cardinal utility).

For a given pair of goods, many indifference curves can be drawn and placed next to each other. This representation is called an Indifference Map. The rational consumer is expected to prefer the higher or right most Indifference curve, since they represent combinations of goods providing higher levels of consumption.

Consumer theory uses indifference curves and budget constraints to produce consumer demand curves.


July 2005-August 2005

Economic growth is the increase in the value of goods and services produced by an economy. It is conventionally measured as the percent rate of increase in real gross domestic product, or GDP. Growth is usually calculated in real terms, i.e. inflation-adjusted terms, in order to net out the effect of inflation on the price of the goods and services produced. In economics, "economic growth" or "economic growth theory" typically refers to growth of potential output, i.e., production at "full employment," rather than growth of aggregate demand.

In the early modern period, some people in Western European nations began conceiving of the idea that economies could "grow", that is, produce a greater economic surplus which could be expended on something other than religious or governmental projects (such as war). The previous view was that only increasing either population or tax rates could generate more surplus money for the Crown or country.

During much of the "Mercantilist" period, growth was seen as involving an increase in the total amount of specie, that is circulating medium such as silver and gold, under the control of the state. This "Bullionist" theory led to policies to force trade through a particular state, the acquisition of colonies to supply cheaper raw materials which could then be manufactured and sold.

  1. ^ Shiller 2005, p. 85 More extensive discussion of status as the earliest bubble on p. 247–48.
  2. ^ French 2006, p. 3
  3. ^ "The Tulipomania", Chapter 3, in Mackay 1841.
  4. ^ Thompson 2007, p. 100
  5. ^ Cite error: The named reference Kuper was invoked but never defined (see the help page).
  6. ^ A pamphlet about the Dutch tulipomania Wageningen Digital Library, July 14, 2006. Retrieved on August 13, 2008.