In economics, an externality is the cost or benefit that affects a party who did not choose to incur that cost or benefit. Economists often urge governments to adopt policies that internalize an externality, if external costs exist, such as pollution, the producer may choose to produce more of the product than would be produced if the producer were required to pay all associated environmental costs. Because responsibility or consequence for self-directed action lies partly outside the self, if there are external benefits, such as in public safety, less of the good may be produced than would be the case if the producer were to receive payment for the external benefits to others. For the purpose of these statements, overall cost and benefit to society is defined as the sum of the monetary value of benefits and costs to all parties involved. Two British economists are credited with having initiated the study of externalities, or spillover effects, Henry Sidgwick is credited with first articulating.
Pigou is credited with formalizing the concept of externalities, suppose that there are K different possible allocations and N different agents, where K, N < ∞ and N ≥2. Suppose that each agent has a type θ i ∼ F i and that each agent gets payoff v i + t i, a map f = is a social choice function if ∑ i =1 N t i ≤0 for all θ ∈ N. An allocation κ, N → K is ex-post efficient if ∑ i =1 N v i ≥ ∑ i =1 N v i for all θ = ∈ N and all k ∈ K. Let κ ∗ denote an ex-post efficient allocation and let κ i ~ denote an ex-post efficient allocation without agent i. Then the externality imposed by agent i on the agents is ∑ j ≠ i v j − ∑ j ≠ i v j. Voluntary exchange is considered beneficial to both parties involved, because buyers or sellers would not trade if either thought it detrimental to themselves. However, a transaction can cause effects on third parties. From the perspective of those affected, these effects may be negative, neoclassical welfare economics asserts that, under plausible conditions, the existence of externalities will result in outcomes that are not socially optimal.
Those who suffer from external costs do so involuntarily, whereas those who enjoy external benefits do so at no cost, a voluntary exchange may reduce societal welfare if external costs exist. The externality may even be seen as a trespass on their lungs, thus, an external cost may pose an ethical or political problem. Alternatively, it might be seen as a case of poorly defined property rights, as with, for example, on the other hand, a positive externality would increase the utility of third parties at no cost to them. Since collective societal welfare is improved, but the providers have no way of monetizing the benefit, Goods with positive externalities include education, public health initiatives and law enforcement. Positive externalities are often associated with the free rider problem, there are a number of potential means of improving overall social utility when externalities are involved
Political economy is a term used for studying production and trade, and their relations with law and government, as well as with the distribution of national income and wealth. Political economy originated in moral philosophy and it was developed in the 18th century as the study of the economies of states, or polities, hence the term political economy. In the late 19th century, the term came to replace political economy. Earlier, William Stanley Jevons, a proponent of mathematical methods applied to the subject, advocated economics for brevity and it is available as an area of study in certain colleges and universities. Originally, political economy meant the study of the conditions under which production or consumption within limited parameters was organized in nation-states, in that way, political economy expanded the emphasis of economics, which comes from the Greek oikos and nomos. Thus, political economy was meant to express the laws of production of wealth at the state level, the phrase économie politique first appeared in France in 1615 with the well-known book by Antoine de Montchrétien, Traité de l’economie politique.
The French physiocrats, along with Adam Smith, John Stuart Mill, David Ricardo, Henry George, the worlds first professorship in political economy was established in 1754 at the University of Naples Federico II in southern Italy. The Neapolitan philosopher Antonio Genovesi was the first tenured professor, in 1763, Joseph von Sonnenfels was appointed a Political Economy chair at the University of Vienna, Austria. Thomas Malthus, in 1805, became Englands first professor of economy, at the East India Company College, Haileybury. This left the class of 1998 as the last to be graduated with a Master of Arts in Political Economy. In the United States, political economy first was taught at the College of William and Mary, an early and continuing focus of that research program is what came to be called constitutional political economy. Other traditional topics include analysis of public policy issues as economic regulation, rent-seeking, market protection, institutional corruption. From the mid-1990s, the field has expanded, in part aided by new data sets that allow tests of hypotheses on comparative economic systems.
New political economy may treat economic ideologies as the phenomenon to explain, Charles S. Maier suggests that a political economy approach interrogates economic doctrines to disclose their sociological and political premises. In sum, regards economic ideas and behavior not as frameworks for analysis and this approach informs Andrew Gambles The Free Economy and the Strong State, and Colin Hays The Political Economy of New Labour. It informs much work published in New Political Economy, a journal founded by Sheffield University scholars in 1996. International political economy is a field comprising approaches to the actions of various actors. They are associated with the journal The Review of International Political Economy, there is a more critical school of IPE, inspired by thinkers such as Antonio Gramsci and Karl Polanyi, two major figures are Matthew Watson and Robert W. Cox
Long and short scales
Thus, billion means a million millions, trillion means a million billions, and so on. Short scale Every new term greater than million is one thousand times larger than the previous term, billion means a thousand millions, trillion means a thousand billions, and so on. For whole numbers less than a million the two scales are identical. From a thousand million up the two scales diverge, using the words for different numbers, this can cause misunderstanding. Countries where the scale is currently used include most countries in continental Europe and most French-speaking, Spanish-speaking. The short scale is now used in most English-speaking and Arabic-speaking countries, in Brazil, in former Soviet Union, number names are rendered in the language of the country, but are similar everywhere due to shared etymology. Some languages, particularly in East Asia and South Asia, have large number naming systems that are different from both the long and short scales, for example the Indian numbering system.
After several decades of increasing informal British usage of the scale, in 1974 the government of the UK adopted it. With very few exceptions, the British usage and American usage are now identical, the first recorded use of the terms short scale and long scale was by the French mathematician Geneviève Guitel in 1975. At and above a million the same names are used to refer to numbers differing by a factor of an integer power of 1,000. Each scale has a justification to explain the use of each such differing numerical name. The short-scale logic is based on powers of one thousand, whereas the long-scale logic is based on powers of one million, in both scales, the prefix bi- refers to 2 and tri- refers to 3, etc. However only in the scale do the prefixes beyond one million indicate the actual power or exponent. In the short scale, the prefixes refer to one less than the exponent, the word, derives from the Old French, from the earlier Old Italian, milione, an intensification of the Latin word, mille, a thousand.
That is, a million is a big thousand, much as a great gross is a dozen gross or 12×144 =1728, the word, milliard, or its translation, is found in many European languages and is used in those languages for 109. However, it is unknown in American English, which uses billion, and not used in British English, which preferred to use thousand million before the current usage of billion. The financial term, which derives from milliard, is used on financial markets, as, unlike the term, billion, it is internationally unambiguous and phonetically distinct from million. Likewise, many long scale use the word billiard for one thousand long scale billions
In economics, a service is a transaction in which no physical goods is transferred from the seller to the buyer. The benefits of such a service are held to be demonstrated by the willingness to make the exchange. Public services are those that society as a whole pays for, using resources, skill and experience, service providers benefit service consumers. Services can be described in terms of their key characteristics, sometimes called the Five Is of Services and they are not manufactured, transported or stocked. Services cannot be stored for a future use and they are produced and consumed simultaneously. Services are perishable in two regards, Service-relevant resources and systems are assigned for delivery during a specific period in time. If the service consumer does not request and consume the service during this period, from the perspective of the service provider, this is a lost business opportunity if no other use for those resources is available. Examples, A hairdresser serves another client, an empty seat on an airplane cannot be filled after departure.
When the service has been rendered to the consumer, this particular service irreversibly vanishes. Example, a passenger has been transported to the destination and the flight is over, the service provider must deliver the service at the time of service consumption. The service is not manifested in an object that is independent of the provider. The service consumer is inseparable from service delivery, The service consumer must sit in the hairdressers chair, or in the airplane seat. Correspondingly, the hairdresser or the pilot must be in the shop or plane, many services are regarded as heterogeneous and are typically modified for each service consumer or each service context. Another and more common term for this is heterogeneity, both service provider and service consumer participate in the service provision. Mass generation and delivery of services must be mastered for a provider to expand. This can be seen as a problem of service quality, both inputs and outputs to the processes involved providing services are highly variable, as are the relationships between these processes, making it difficult to maintain consistent service quality.
Many services involve variable human activity, rather than a precisely determined process, the human factor is often the key success factor in service provision. Demand can vary by season, time of day, business cycle, consistency is necessary to create enduring business relationships
Economics is a social science concerned chiefly with description and analysis of the production and consumption of goods and services according to the Merriam-Webster Dictionary. Economics focuses on the behaviour and interactions of economic agents and how economies work, consistent with this focus, textbooks often distinguish between microeconomics and macroeconomics. Microeconomics examines the behaviour of elements in the economy, including individual agents and markets, their interactions. Individual agents may include, for example, firms, macroeconomics analyzes the entire economy and issues affecting it, including unemployment of resources, economic growth, and the public policies that address these issues. Economic analysis can be applied throughout society, as in business, health care, Economic analyses may be applied to such diverse subjects as crime, the family, politics, social institutions, war and the environment. At the turn of the 21st century, the domain of economics in the social sciences has been described as economic imperialism.
The ultimate goal of economics is to improve the conditions of people in their everyday life. There are a variety of definitions of economics. Some of the differences may reflect evolving views of the subject or different views among economists, to supply the state or commonwealth with a revenue for the publick services. Say, distinguishing the subject from its uses, defines it as the science of production, distribution. On the satirical side, Thomas Carlyle coined the dismal science as an epithet for classical economics, in this context and it enquires how he gets his income and how he uses it. Thus, it is on the one side, the study of wealth and on the other and more important side, a part of the study of man. He affirmed that previous economists have usually centred their studies on the analysis of wealth, how wealth is created and consumed, but he said that economics can be used to study other things, such as war, that are outside its usual focus. This is because war has as the goal winning it, generates both cost and benefits, resources are used to attain the goal.
If the war is not winnable or if the costs outweigh the benefits. Some subsequent comments criticized the definition as overly broad in failing to limit its subject matter to analysis of markets, there are other criticisms as well, such as in scarcity not accounting for the macroeconomics of high unemployment. The same source reviews a range of included in principles of economics textbooks. Among economists more generally, it argues that a particular definition presented may reflect the direction toward which the author believes economics is evolving, microeconomics examines how entities, forming a market structure, interact within a market to create a market system
The World Bank is an international financial institution that provides loans to countries of the world for capital programs. It comprises two institutions, the International Bank for Reconstruction and Development, and the International Development Association, the World Bank is a component of the World Bank Group, which is part of the United Nations system. The World Banks stated official goal is the reduction of poverty, the president of the World Bank is, traditionally, an American. The World Bank and the IMF are both based in Washington, D. C. and work closely with each other, although many countries were represented at the Bretton Woods Conference, the United States and United Kingdom were the most powerful in attendance and dominated the negotiations. Before 1974 the reconstruction and development loans provided by the World Bank were relatively small, the Banks staff were aware of the need to instill confidence in the bank. Fiscal conservatism ruled, and loan applications had to meet strict criteria, the first country to receive a World Bank loan was France.
The Banks president at the time, John McCloy, chose France over two other applicants and Chile, the loan was for US$250 million, half the amount requested, and it came with strict conditions. France had to agree to produce a budget and give priority of debt repayment to the World Bank over other governments. World Bank staff closely monitored the use of the funds to ensure that the French government met the conditions. In addition, before the loan was approved, the United States State Department told the French government that its members associated with the Communist Party would first have to be removed, the French government complied with this diktat and removed the Communist coalition government - the so-called tripartisme. Within hours, the loan to France was approved, when the Marshall Plan went into effect in 1947, many European countries began receiving aid from other sources. Faced with this competition, the World Bank shifted its focus to non-European countries, in 1960, the International Development Association was formed, providing soft loans to developing countries.
From 1974 to 1980 the bank concentrated on meeting the needs of people in the developing world. The size and number of loans to borrowers was greatly increased as loan targets expanded from infrastructure into social services and these changes can be attributed to Robert McNamara, who was appointed to the presidency in 1968 by Lyndon B. Johnson. McNamara implored bank treasurer Eugene Rotberg to seek out new sources of capital outside of the banks that had been the primary sources of funding. Rotberg used the bond market to increase the capital available to the bank. One consequence of the period of poverty alleviation lending was the rise of third world debt. From 1976 to 1980 developing world debt rose at an annual rate of 20%
Social cost in economics may be distinguished from private cost. Economic theorists model individual decision-making as measurement of costs and benefits, Social cost is considered to be the private cost plus externalities. Rational choice theory often assumes that individuals consider only the costs they themselves bear when making decisions, with pure private costs, the costs carried by the individuals involved are the only economically meaningful costs. The choice to purchase a glass of lemonade at a stand has little consequence for anyone other than the seller or the buyer. If there is an externality, social costs will be greater than private costs. Environmental pollution is an example of a social cost that is seldom borne completely by the polluter, if there is a positive externality, one will have higher social benefits than private benefits. In either case, economists refer to this as market failure because resources will be allocated inefficiently, in the case of negative externalities, private agents will engage in too much of the activity, in the case of positive externalities, they will engage in too little.
The ideas of social cost and market failure are often used as an argument for government intervention in the form of regulations and they prefer to rely on tradition, community pressure, and dollar voting. Negative externalities lead to an over-production of those goods that have a social cost. As a result, individual entities in the marketplace have no incentive to factor in these externalities, more of this activity is performed than would be if its cost had a true accounting. This can be illustrated with a diagram, profit-maximizing organizations will set output at Qp where marginal private costs is equal to marginal revenue. This will yield a profit shown by the triangular area 0, C, F, but if externalities are present, the attainment of social optimality requires that the full social costs must be considered. The socially optimum level of output is Qs where marginal social costs or referred to as the Marginal Social Damage is equal to marginal revenue, the amount of output, Qp minus Qs, indicates the excess output due to the externality.
Profits will decrease also, from 0, C, F to 0, A, F and it is clearly profitable for the firm to pollute, since internalizing the externality hurts profits. The amount of the externality will decrease from C, D to B, A, because the marginal social cost curve is above the marginal private cost curve, this diagram illustrates the case of a negative externality. Kapp proposes to prevent damages ex ante via precautionary regulations that reflect socially determined safety standards, Social Costs Today - Institutional Analyses of the Present Crisis, edited by Paolo Ramazzotti, Pietro Frigato and Wolfram Elsner, Routledge. Social Costs and Public Action in Modern Capitalism, edited by Wolfram Elsner, Pietro Frigato and Paolo Ramazzotti, Routledge
United States dollar
The United States dollar is the official currency of the United States and its insular territories per the United States Constitution. It is divided into 100 smaller cent units, the circulating paper money consists of Federal Reserve Notes that are denominated in United States dollars. The U. S. dollar was originally commodity money of silver as enacted by the Coinage Act of 1792 which determined the dollar to be 371 4/16 grain pure or 416 grain standard silver, the currency most used in international transactions, it is the worlds primary reserve currency. Several countries use it as their currency, and in many others it is the de facto currency. Besides the United States, it is used as the sole currency in two British Overseas Territories in the Caribbean, the British Virgin Islands and Turks and Caicos Islands. A few countries use the Federal Reserve Notes for paper money, while the country mints its own coins, or accepts U. S. coins that can be used as payment in U. S. dollars. After Nixon shock of 1971, USD became fiat currency, Article I, Section 8 of the U. S.
Constitution provides that the Congress has the power To coin money, laws implementing this power are currently codified at 31 U. S. C. Section 5112 prescribes the forms in which the United States dollars should be issued and these coins are both designated in Section 5112 as legal tender in payment of debts. The Sacagawea dollar is one example of the copper alloy dollar, the pure silver dollar is known as the American Silver Eagle. Section 5112 provides for the minting and issuance of other coins and these other coins are more fully described in Coins of the United States dollar. The Constitution provides that a regular Statement and Account of the Receipts and that provision of the Constitution is made specific by Section 331 of Title 31 of the United States Code. The sums of money reported in the Statements are currently being expressed in U. S. dollars, the U. S. dollar may therefore be described as the unit of account of the United States. The word dollar is one of the words in the first paragraph of Section 9 of Article I of the Constitution, dollars is a reference to the Spanish milled dollar, a coin that had a monetary value of 8 Spanish units of currency, or reales.
In 1792 the U. S. Congress passed a Coinage Act, Section 20 of the act provided, That the money of account of the United States shall be expressed in dollars, or units. And that all accounts in the offices and all proceedings in the courts of the United States shall be kept and had in conformity to this regulation. In other words, this act designated the United States dollar as the unit of currency of the United States, unlike the Spanish milled dollar the U. S. dollar is based upon a decimal system of values. Both one-dollar coins and notes are produced today, although the form is significantly more common
In economics, an indifference curve connects points on a graph representing different quantities of two goods, points between which a consumer is indifferent. That is, the consumer has no preference for one combination or bundle of goods over a different combination on the same curve, one can refer to each point on the indifference curve as rendering the same level of utility for the consumer. In other words, a curve is the locus of various points showing different combinations of two goods providing equal utility to the consumer. Utility is a device to represent preferences rather than something from which preferences come, the main use of indifference curves is in the representation of potentially observable demand patterns for individual consumers over commodity bundles. There are infinitely many curves, one passes through each combination. A collection of curves, illustrated graphically, is referred to as an indifference map. The theory can be derived from William Stanley Jevons ordinal utility theory, a graph of indifference curves for several utility levels of an individual consumer is called an indifference map.
Points yielding different utility levels are associated with distinct indifference curves. Each point on the curve represents the same elevation, If you move off an indifference curve traveling in a northeast direction you are essentially climbing a mound of utility. The higher you go the greater the level of utility, the non-satiation requirement means that you will never reach the top, or a bliss point, a consumption bundle that is preferred to all others. Indifference curves are typically represented to be, Defined only in the quadrant of commodity quantities. That is, as quantity consumed of one increases, total satisfaction would increase if not offset by a decrease in the quantity consumed of the other good. Equivalently, such that more of good is equally preferred to no increase, is excluded. So, with, no two curves can intersect, transitive with respect to points on distinct indifference curves. That is, if each point on I2 is preferred to each point on I1, convex preferences imply that the indifference curves cannot be concave to the origin, i. e. they will either be straight lines or bulge toward the origin of the indifference curve.
If the latter is the case, as a consumer decreases consumption of one good in successive units, the consumer has ranked all available alternative combinations of commodities in terms of the satisfaction they provide him. Assume that there are two consumption bundles A and B each containing two commodities x and y, if A I B and B I C, A I C. Preferences are continuous If A is preferred to B and C is sufficiently close to B A is preferred to C, continuous means infinitely divisible - just like there are infinitely many numbers between 1 and 2 all bundles are infinitely divisible
International Monetary Fund
The International Monetary Fund is an international organization headquartered in Washington, D. C. It now plays a role in the management of balance of payments difficulties. Countries contribute funds to a pool through a system from which countries experiencing balance of payments problems can borrow money. As of 2016, the fund had SDR477 billion, the rationale for this is that private international capital markets function imperfectly and many countries have limited access to financial markets. The IMF provides alternate sources of financing and this assistance was meant to prevent the spread of international economic crises. The IMF was intended to help mend the pieces of the economy after the Great Depression. As well, to provide investments for economic growth and projects such as infrastructure. The IMFs role was altered by the floating exchange rates post-1971. It shifted to examining the economic policies of countries with IMF loan agreements to determine if a shortage of capital was due to economic fluctuations or economic policy, the IMF researched what types of government policy would ensure economic recovery.
Rather than maintaining a position of oversight of only exchange rates and their role became a lot more active because the IMF now manages economic policy rather than just exchange rates. In addition, the IMF negotiates conditions on lending and loans under their policy of conditionality, nonconcessional loans, which include interest rates, are provided mainly through Stand-By Arrangements, the Flexible Credit Line, the Precautionary and Liquidity Line, and the Extended Fund Facility. The IMF provides emergency assistance via the Rapid Financing Instrument to members facing urgent balance-of-payments needs, the IMF is mandated to oversee the international monetary and financial system and monitor the economic and financial policies of its member countries. This activity is known as surveillance and facilitates international cooperation, the responsibilities changed from those of guardian to those of overseer of members’ policies. In 1995 the International Monetary Fund began work on data dissemination standards with the view of guiding IMF member countries to disseminate their economic and financial data to the public.
The executive board approved the SDDS and GDDS in 1996 and 1997 respectively, the system is aimed primarily at statisticians and aims to improve many aspects of statistical systems in a country. It is part of the World Bank Millennium Development Goals, some countries initially used the GDDS, but upgraded to SDDS. The IMF does require collateral from countries for loans but requires the government seeking assistance to correct its macroeconomic imbalances in the form of policy reform, if the conditions are not met, the funds are withheld. The concept of conditionality was introduced in a 1952 Executive Board decision, conditionality is associated with economic theory as well as an enforcement mechanism for repayment
The world economy or global economy is the economy of the world, considered as the international exchange of goods and services that is expressed in monetary units of account. Beyond the minimum standard concerning value in production and exchange the definitions, models and it is inseparable from the geography and ecology of Earth. Typical examples are illegal drugs and other market goods, which by any standard are a part of the world economy. Rather, market valuations in a local currency are typically translated to a monetary unit using the idea of purchasing power. This is the method used below, which is used for estimating worldwide economic activity in terms of real US dollars or euros, the world economy can be evaluated and expressed in many more ways. It is unclear, for example, how many of the worlds 7.13 billion people have most of their economic activity reflected in these valuations, the following two tables list the Country Groups with individual countries designated by the IMF.
Members of the G-20 major economies are in bold, the following two tables list the twenty largest economies by GDP, twenty largest economies by GDP, and the twenty economies with the largest shares of global economic growth from 2014 to 2015. Members of the G-20 major economies are in bold, the following is a list of the twenty largest economies by nominal GDP at a specific year according to International Monetary Fund. The following is a list of twenty largest economies by GDP at a year according to the CIA World Factbook. €320 billion, $319 billion, €250 trillion Unemployment rate,8. 7%, World military expenditure in 2012, estimated to $1.756 trillion Military expenditures – percent of GDP, roughly 2% of gross world product. To promote exports, many government agencies publish on the web economic studies by sector and country. Among these agencies include the USCS and FAS in the United States, EDC and AAFC in Canada, Ubifrance in France, UKTI in the UK, HKTDC and JETRO in Asia, Austrade and NZTE in Oceania. net
One goal of microeconomics is to analyze the market mechanisms that establish relative prices among goods and services and allocate limited resources among alternative uses. Microeconomics shows conditions under which free markets lead to desirable allocations and it analyzes market failure, where markets fail to produce efficient results. Microeconomics deals with the effects of economic policies on the aspects of the economy. Particularly in the wake of the Lucas critique, much of modern macroeconomic theory has been built upon microfoundations—i. e, based upon basic assumptions about micro-level behavior. Microeconomic theory typically begins with the study of a single rational, to economists, rationality means an individual possesses stable preferences that are both complete and transitive. The technical assumption that preference relations are continuous is needed to ensure the existence of a utility function, microeconomic theory progresses by defining a competitive budget set which is a subset of the consumption set.
It is at point that economists make the technical assumption that preferences are locally non-satiated. Without the assumption of LNS there is no guarantee that an individual would maximize utility. With the necessary tools and assumptions in place the utility maximization problem is developed, the utility maximization problem is the heart of consumer theory. The utility maximization problem attempts to explain the action axiom by imposing rationality axioms on consumer preferences, the utility maximization problem serves not only as the mathematical foundation of consumer theory but as a metaphysical explanation of it as well. That is, the utility maximization problem is used by economists to not only explain what or how individuals make choices, the utility maximization problem is a constrained optimization problem in which an individual seeks to maximize utility subject to a budget constraint. Economists use the extreme value theorem to guarantee that a solution to the utility maximization problem exists and that is, since the budget constraint is both bounded and closed, a solution to the utility maximization problem exists.
Economists call the solution to the utility maximization problem a Walrasian demand function or correspondence, the utility maximization problem has so far been developed by taking consumer tastes as the primitive. However, a way to develop microeconomic theory is by taking consumer choice as the primitive. This model of microeconomic theory is referred to as Revealed preference theory, the theory of supply and demand usually assumes that markets are perfectly competitive. This implies that there are buyers and sellers in the market and none of them have the capacity to significantly influence prices of goods. In many real-life transactions, the assumption fails because some individual buyers or sellers have the ability to influence prices, quite often, a sophisticated analysis is required to understand the demand-supply equation of a good model. However, the works well in situations meeting these assumptions