Bernoulli’s hypothesis (18TH CENTURY)

Proposed by Swiss mathematician Daniel Bernoulli (1700-1782), Bernoulli’s hypothesis suggests added dimensions to the evaluation of risk. Acceptance of a risk depends not only on the nominal value of what may be lost but also on the intrinsic value, or utility, of it to the person accepting the risk. In economics, game theory, and decision theory,

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Bertrand duopoly model (1883)

Developed by French mathematician Joseph Bertrand (1822-1903), Bertrand duopoly model is a variant of the standard duopoly (a market characterized by two suppliers). A supplier in the Bertrand duopoly assumes his competitor will not change prices in response to his price cuts. If each follows this logic, an equilibrium will be established and neither firm will benefit from

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Bilateral monopoly

A market characterized by a single seller and a single buyer, otherwise known as a monopoly and a monopsony. Examples of a bilateral monopoly frequently occur in the public sector where a government education employer negotiates with a single teachers’ union on pay and conditions. Bilateral monopoly situations are typically analyzed using the theory of Nash bargaining

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Bimetallism (18TH CENTURY)

A system operating in the USA and in the Latin Union (1865-1873) in Europe during the 19th century, bimetallism used two metals (most commonly gold and silver) to serve as an international standard of value and means of payment. Bimetallism[a] is a monetary standard in which the value of the monetary unit is defined

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Bionomics 1990S

Modern scientific process includes various kinds of researches (in ecology, medicine, biotechnology, biology, economics), which are referred to as bionomics. As an economic theory, bionomics is the application of models and modeling methods from biology to the field of economics. One of the most active developers of this discipline, Michael Rothschild, gives his own

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Bounded rationality (1980S)

Bounded rationality is the idea that rationality is limited, when individuals make decisions, by the tractability of the decision problem, the cognitive limitations of the mind, and the time available to make the decision. Decision-makers, in this view, act as satisficers, seeking a satisfactory solution rather than an optimal one. Herbert A. Simon proposed

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Bureaucracy

Bureaucracy (/bjʊəˈrɒkrəsi/) refers to both a body of non-elected government officials and an administrative policy-making group. Historically,[when?] a bureaucracy was a government administration managed by departments staffed with non-elected officials. Today, bureaucracy is the administrative system governing any large institution, whether publicly owned or privately owned. The public administration in many countries is an

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Business cycle

The business cycle, also known as the economic cycle or trade cycle, is the downward and upward movement of gross domestic product (GDP) around its long-term growth trend. The length of a business cycle is the period of time containing a single boom and contraction in sequence. These fluctuations typically involve shifts over time between periods of relatively rapid economic growth

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Cambridge capital controversies (1930S- )

Cambridge capital controversies refer to the debate between British and American economists concerning the neoclassical approach to economics. They were based at Cambridge University (England) and the Massachusetts Institute of Technology (Cambridge, USA), respectively. The Modern School, particularly influenced by Alfred Marshall (1842-1924) and headed by the English economists Arthur Cecil Pigou (1877-1959) and John Maynard Keynes (1882-1946), refuted the

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Capital asset pricing model (1960S)

Developed by American economist James Tobin (1918-2002) among others, capital asset pricing model (CAPM) studies the relationship between risk and return by suggesting that asset prices will adjust to ensure that the return on an asset compensates for the risk undertaken by the investor, when held with a perfectly diversified portfolio. Capital asset pricing model has

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Capital logic (20TH CENTURY)

Capital logic is a theory within Marxism.Capital Logic is a powerful graphical and design-management environment for authoring both logical connectivity designs (signals), and physical wiring designs (wires, splices, multicores, etc). Capital Logic may be used to design both sub-systems and to accomplish interactive system integration, i.e. the merging of multiple sub-systems into the physical

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Capital theory (18TH CENTURY- )

Developed over a period of 250 years by many economists ranging from Adam Smith (1723-1790) to Karl Marx (1818-1883), capital theory analyzes links among the theories of production, growth, value and distribution to explain why capital produces a return that keeps capital intact yet yields interest or a profit which is permanent. Classical economists

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Catallaxy (20TH CENTURY)

A theory of a desirable society, set out by the Austrian economist and political theorist Friedrich Hayek (1899-1992). A catallaxy is a market order without planned ends, characterized by the ‘spontaneous order’ which emerges when individuals pursue their own ends within a framework set by law and tradition. Catallaxy or catallactics is an alternative expression

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Catastrophe theory (20TH CENTURY)

Catastrophe theory has its roots in the work of French mathematician Jules Henri Poincare (1854-1912). A mathematical study of the transition from one state of equilibrium to another and the ensuing instability. The analysis shows how many stable equilibria exist given a choice of control variables but does not show which of them will

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Central place theory (1933)

Developed by the German economic geographer WALTER CHRISTALLER (1894-1975), central place theory studies how cities and towns develop hierarchies of economic activity from the population size and the distance inhabitants are prepared to travel for goods and services. Central place theory is a geographical theory that seeks to explain the number, size and location of human settlements in a residential system. It

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CES production function (1961)

Proposed by the American economist Kenneth Arrow (1921- ), Hollis Chenery (1918- ), BAGICHA S. MINHAS, and Robert Solow (1924- ), CES production function is also known as the constant elasticity of substitution function. Constant elasticity of substitution (CES), in economics, is a property of some production functions and utility functions. Specifically, it arises in a particular type of aggregator function which combines two or

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Class Struggle

Account of historical change given by German social theorist Karl Marx (1818-1883). The principle division within society is between classes. Classes are groups defined in terms of their relationship to the means of production. They have conflicting interests, and this conflict is the basis of political competition. Class struggle therefore – rather than pursuit of the

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Classical macroeconomic model (18TH-19TH CENTURY)

lassical macroeconomic model is first developed by French economist Jean-Baptiste Say (1767-1832), and later revised by other classical economists. Through the assumptions of factor and product price flexibility, and in the absence of regulations which prevent the market adjustment of demand and supply, full employment equilibrium will be reached in the classical macroeconomic model. Also see: new

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Classical theory of money (17TH-19TH CENTURY)

Money was considered a commodity, the price of which was determined by the amount of time needed to produce it (that is, gold, and silver mining). Classical theory of money was revised by English economist David Ricardo (1772-1823) and the ensuing Bullionist Controversy which paved the way for the Currency School and Banking School of economics

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Coase theorem

Named after the English-born American economist Ronald Harry Coase (1910 – ). Coase theorem asserts that as long as there are well-defined property rights (and no transaction costs), externalities will not cause a breakdown in the allocation of resources. Externalities being defined as the benefits or costs to a society of the process of

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