Cournot duopoly model (1838)

Named after French economist Antoine Augustin Cournot (1801-1877), Cournot duopoly model shows two firms that react to one another’s output changes until they eventually reach a position from which neither would wish to depart. Both firms eventually expand to such a degree that they have equal shares in the market and secure only normal profits. Cournot

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Cramer’s Rule

In linear algebra, Cramer’s rule is an explicit formula for the solution of a system of linear equations with as many equations as unknowns, valid whenever the system has a unique solution. It expresses the solution in terms of the determinants of the (square) coefficient matrix and of matrices obtained from it by replacing

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Crisis of capitalism (19TH CENTURY- )

Prediction in Marxism of the collapse of capitalism. A species of catastrophe theory, envisaging that the inherent contradictions of the capitalist system will lead, through political conflict, to the collapse or overthrow of capitalism. Varieties of capitalism It is an ongoing debate within the fields of economics and sociology as to what the past, current and future

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Imperialism (20TH CENTURY)

Economic explanation of overseas expansion of European nations. Originally developed by the maverick British economist John Atkinson Hobson (1858-1940) and the Russian Marxist Vladimir I. Lenin (1870-1924). Imperial expansion resulted from the exhaustion of domestic markets, industrial nations propping up their economies at the expense of those parts of the world which, through military domination, they

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Market socialism (20TH CENTURY)

Advocacy of markets as an element of socialism. Markets are effective ways of distributing goods and services, and responding to actual wants. But they are not neutral, and the results they give depend upon the structure of laws and the distribution of wealth within which they operate. Appropriate legal and economic structures can make markets

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Crowding hypothesis

Occupations with few or no barriers to entry become crowded, thereby depressing wage levels. Some sectors dominated by women or immigrants display the phenomenon. English economist John Stuart Mill (1806-1873) and Irish-born economist Francis Edgeworth (1845-1926) both used this model of discrimination in their economic analyses. Also see: dual labor market theory, labor force participation, occupation segregation, segmented labor market theory Source:

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Crowding out (1970S)

The displacement of private spending by government expenditure financed by borrowing. When a government borrows heavily, interest rates may be forced to rise, thereby curbing individual consumption. Source: B M Friedman, ‘Crowding out or Crowding in? Economic Consequences of Financing Government Deficits’, Brookings Papers on Economic Activity, vol. ix (1978), 593-641 History The idea

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Currency principle (MID-19TH CENTURY)

Currency principle is concerned with the metallist belief that the money supply or currency in circulation should be strictly related to the amount of gold deposited with the Bank of England. If this money supply were controlled, monetary stability would follow. The Bank Acts of 1844 and 1845 embodied currency principle and helped establish

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Customs union theory (18TH CENTURY)

A customs union is a grouping of countries with a common external tariff, but with free trade, free movement of labor and capital among themselves. Customs union theory examines the impact on trade in general following the removal of barriers (such as quotas and tariffs) between the countries and their establishment against other countries.

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Cyclical theory

Theory of large scale historical or political change. Events, economies, and political systems move through cycles similar to the natural life-cycles of living beings. These cycles can be observed, but there is no obvious explanation for them. The most familiar Cyclical theoryversion is Spengler’s decline of the west. Huntington’s periods of creedal passion Historian Samuel P.

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DeLorean theory (1990)

Theory of academic work described by English political scientist Rodney Barker (1942- ). Academic and artistic activities are measured according to the amount of funding they attract, rather than by the quality or quantity of their output. Named after the unsuccessful motor car manufacturer JOHN DeLOREAN (1925- ), who attracted large amounts of money for his

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Demand for money theory (20TH CENTURY)

Also known as liquidity preference, demand for money theory deals with the desire to hold money rather than other forms of wealth (for example stocks and shares). It is particularly associated with the work of English economist John Maynard Keynes (1882-1946). Keynes distinguished three motives for holding money: the transaction motive (to meet day-to-day needs); the speculative

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Demand pull inflation (1940)

Outlined by English economist John Maynard Keynes (1883-1946), demand pull inflation describes a rise in prices triggered by an excess of demand for the available supply in the economy. Keynes raised an important concept of an inflationary gap, which replaced the notion that inflation was caused by a rise in the money supply. Also see: cost-push inflation, quantity theory

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Demand theory (19TH CENTURY- )

First raised as a fundamental principle of microeconomics by French economist Leon Walras (1834-1910), demand theory is the analysis of the relationship between the demand for goods or services and prices or incomes. Demand theory examines purchasing decisions of consumers and the subsequent impact on prices. The theory was subsequently developed by English economist Alfred Marshall (1842-1924), Italian Vilfredo

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Demographic transition (20TH CENTURY)

Demographic transition is a process by which underdeveloped countries experience a change in their birth and mortality rates because of a change in the economic development of the state. Over time and with rising influence, high birth and death rates are replaced by slower or declining birth rates. Also see: Malthusian population theory, secular stagnation theory

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Dependency theory (1957)

First formulated by American economist Paul Baran (1910-1964), dependency theory proposes that, where a developing country for the most part specializes in producing one good (usually agricultural) for export, an exploitative relationship develops in which its financial and economic resources are controlled by the local elite and the international economy. Also see: demographic transition Source: P Baran,

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Differential rent theory (19TH CENTURY)

Raised as an issue by Scottish economist JAMES ANDERSON (1739-1808) and English economist David Ricardo (1772-1823), differential rent theory asserts that rent arises because of the differences in the fertility or location of agricultural land. No rent is paid on the worst land and the total amount of rent increases as the margin of cultivation is

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Disequilibrium theory (20TH CENTURY)

Found in the work of English economist John Maynard Keynes (1883-1946), disequilibrium theory refers to a situation in which market equilibrium has not been reached or where there is a tendency for variable factors to change. Keynes believed that an economy has a natural inclination towards disequilibrium. Also see: equilibrium theory, general equilibrium theory, partial equilibrium theory, fundamental disequilibrium, classical macroeconomic model, law

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Distribution theory (18TH CENTURY- )

One of the fundamental components of modern economic theory, first examined by French economist ANNE-ROBERT JACQUES TURGOT (1727-1781), distribution theory is an explanation of how national income is distributed between different groups involved in the production process. Functional distribution of income is that earned by the owners of the various factors of production. The income earned

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