Cobb-Douglas production function (1928)

Developed by American economist PAUL DOUGLAS (1892-1976) and mathematician CHARLES W. COBB. In economics and econometrics, the Cobb–Douglas production function is a particular functional form of the production function, widely used to represent the technological relationship between the amounts of two or more inputs (particularly physical capital and labor) and the amount of output that can be produced by those

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Cobweb theory (1934)

Named by Hungarian-born economist Nicholas Kaldor (1908-1986), cobweb theory stems from a simple dynamic model of cyclical demand which involves time lags between the response of production and a change in price (most often seen in agricultural sectors). Cobweb theory focuses on the process of adjustment in markets by tracing the path of prices and outputs

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Collective bargaining theory (20TH CENTURY)

Collective bargaining theory refers to studies carried out by UK political economist Alfred Marshall (1842-1924) into the negotiation of wage rates and conditions of employment by representatives of the labor force (usually trade union officials) and management. Collective bargaining is a process of negotiation between employers and a group of employees aimed at agreements to regulate working salaries, working

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Collusion theory

Collusion is a secret cooperation or deceitful agreement in order to deceive others, although not necessarily illegal, as is a conspiracy. A secret agreement between two or more parties to limit open competition by deceiving, misleading, or defrauding others of their legal rights, or to obtain an objective forbidden by law typically by defrauding or gaining an unfair market advantage

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Colonialism

Colonialism is the theory of the territorial extension of national power. Colonialism is the policy of a country seeking to extend or retain its authority over other people or territories, generally with the aim of economic dominance. In the process of colonisation, colonisers may impose their religion, economics, and other cultural practices on indigenous peoples. The foreign invaders/interlopers

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Commodity theory of money

Commodity theory of money refers to a system of money based on a specific commodity; that is, any good suitable for exchange or consumption. The system is usually linked to a specific quantity of the commodity whose value is determined by its price in the marketplace. The Gold Standard was a commodity money system.

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Comparative costs (18TH-19TH CENTURY)

A feature of the comparative advantage principle developed by English economists Robert Torrens (1780-1864) and David Ricardo (1772-1823). The law of comparative advantage describes how, under free trade, an agent will produce more of and consume less of a good for which they have a comparative advantage. In an economic model, agents have a comparative advantage over others in producing a particular good if they can produce

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Compensation principle

Compensation principle has its roots in the work of French engineer and economist Jules Dupuit (1804-1866), English political economist Alfred Marshall (1842-1924) and Italian sociologist and economist Vilfredo Pareto (1848-1923). It refers to a transfer mechanism by which total economic welfare is maximized when individuals who gain from a change in the economy compensate

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Composite commodity (1939)

Developed by English economist John Hicks (1909-1989), composite commodity describes a group of goods whose relative prices do not vary and can thus be treated as one commodity. Purpose Consumer demand theory shows how the composite may be treated as if it were only a single good as to properties hypothesized about demand. The composite

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Condorcet’s Principle (1785)

Named after French mathematician and philosopher MARIE ANTOINE CONDORCET (1743-1794), Condorcet’s principle deals with the complexity of voting and choices, by which the final choice is made by rejection of all other alternatives in a series of paired contests. Condorcet’s jury theorem is a political science theorem about the relative probability of a given group of individuals

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Consumer surplus (19TH-20TH CENTURY)

Identified by French engineer and economist Jules Dupuit (1804-1866) and later developed by English economist Alfred Marshall (1842-1924), consumer surplus theory assumes that the price paid by consumers for a good never exceeds and seldom equals the amount they are willing to pay rather than forgo the good. In mainstream economics, economic surplus, also known as total welfare

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Contestable markets theory (1982)

Developed by American economist William Baumol (1922-), contestable markets theory defines contestability as the effectiveness of barriers to entry and exit in a market. Perfect competition, with complete freedom of movement, is perfectly contestable. In economics, the theory of contestable markets, associated primarily with its 1982 proponent William J. Baumol, holds that there are

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Continuity thesis

An assertion that a continuum exists between the classical and neoclassical schools of economy which was not disrupted by the rise of the Marginalist movement of the 1870s. Continuity thesis maintains that English economist Alfred Marshall (1842-1924) did not overturn classical economics but simply used sharper mathematical tools to refine Ricardian economics. In the history of

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Contract theory

Contract theory is the study of the manner in which labor and capital agree the parameters of production, and the amount of risk and rewards each side will bear. In economics, contract theory studies how economic actors can and do construct contractual arrangements, generally in the presence of asymmetric information. Because of its connections

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Convergence theory (1960S)

Theory of development of industrial nations, first proposed by Dutch economist JAN TINBERGEN (1903-1994). The division between capitalist democracies in Western Europe and North America, and communist states in Eastern Europe, is fading. The nature of industrial society leads both types to converge towards a common centre. Capitalist societies are becoming more organized and

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Co-operative games theory (1940S)

A branch of game theory dealing with co-operative rather than simply competitive players. Game theory attempts to study the interaction of individual decisions (given specific assumptions about decisions made under risk), the general environment and individual behavior patterns. Co-operative games theory is used in the analysis of cartels and other forms of market collusion.

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Corporatism

Corporatism is a political ideology which advocates the organization of society by corporate groups, such as agricultural, labour, military, scientific, or guild associations on the basis of their common interests. The term is derived from the Latin corpus, or “human body”. The hypothesis that society will reach a peak of harmonious functioning when each

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Cost benefit analysis (19TH CENTURY- )

First examined by French engineer and economist Jules Dupuit (1804-1866) and later developed by 20th century economists, cost benefit analysis is the determination of the total value of a proposed investment’s inputs and outputs. Cost benefit analysis examines opportunity costs, externalities, shadow prices and estimates of future interest rates. The technique was first used in the assessment

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Cost push inflation (1950S)

Examined by American and European economists in response to high inflation levels, cost push inflation refers to a rise in prices triggered by an increase in the costs of production (such as wages or commodity prices) in the absence of an increase in demand.After the large price increases in the period between World War

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Countervailing power (1952- )

Countervailing power is the theory of political modification of markets, formulated by American economist JOHN KENNETH GALBRAITH (1908- ). In the classic liberal economy, goods and services are provided and prices set by free bargaining. Modern economies give massive powers to large business corporations to bias this process, and there arise ‘countervailing’ powers in

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