feared the movement of an economy towards this state, with the major excep- tion of John Stuart MILL who welcomed an economy not concerned with ruthless ex- pansion that could instead pay attention to income distribution and the quality of life. See also: steady state economy References Mill, J. S. (1965) Principles of Political Economy: With Some of Their Applica- tions to Social Philosophy, ed. J.M. Robson, Book IV, ch. VI, Toronto: University of Toronto Press. statistical population (C1) A group, finite or infinite in size, of persons or things with at least one com- mon characteristic. Statisticians attempt to learn about the nature of a population by taking samples. statistics (C1) A set of methods for the collection, presentation, summary and analysis of data with a view to the drawing of valid conclusions. References Hughes, A.J. (1971) Statistics: A Foundation for Analysis, Reading, MA: Addison- Wesley. statutory incidence (H2) see tax incidence statutory minimum wage rate (J3) The minimum wage set in the UK by a WAGES COUNCIL for the group of workers covered by that council. Trade union and employer representatives sit with indepen- dent members of a council to make the recommendation of a new minimum wage rate to the Secretary of State for Employ- ment. The reduction in the number of such councils in the 1980s reduced the number of these wage rates. The new UK govern- ment introduced a national minimum wage in 1998. Seealso:minimumwage;wagescouncil Statutory Reserve Deposit (G2) An account of an Australian trading bank at the Reserve Bank which must be equal to 7 per cent of the bank’s total deposits. steady state economy (E0) An economy with a constant size of population and stock of capital goods. The number of births and immigrants is equal to the number of deaths and emigrants; investment is only undertaken to maintain the existing capital stock. See also: stationary state steady state equilibrium (D0) An EQUILIBRIUM whose stability is such that the market to which it refers returns to its original state after a temporary change in an EXOGENOUS VARIABLE, or moves to a new equilibrium after a permanent change in an exogenous variable. steady state growth (O4) Growth such that capital, labour, total consumption and output change at the same rate. As the rate of growth of capital depends upon savings, steady state growth requires the savings function to have stable characteristics: debt policy can pro- mote stability by keeping the rate of interest constant. Steady state growth does not entail FULL EMPLOYMENT as it is compatible with various levels of unem- ployment. stealth tax (H2) An indirect tax hardly noticed by the tax- paying public. Usually, as in the UK in the late 1990s, these taxes are gradually in- creased as part of complex tax legislation to avoid much public reaction. step cost (M2) A cost which is fixed over a range of output and then rises to a new level, or plateau, over a range of larger output. Fixed costs have to be paid when output is zero. (See the figure.) © 2002 Donald Rutherford stepped bond (G0) A bond with an interest rate increasing over its lifetime. This method of financing a company pushes up the company’s rate of profit in the short term as it reduces its interest charges. sterilization (E5) Isolating the domestic money supply from the effects of BALANCE OF PAYMENTS deficits and surpluses. This is achieved by a cen- tral bank’s OPEN MARKET OPERATIONS;for example, in the case of a balance of pay- ments deficit it will buy bonds from domes- tic bond-holders to increase the amount of cash available. Under the GOLD STANDARD, sterilization required preventing an inflow of gold from increasing the quantity of money domestically in circulation. sterling (E4) The UK’s domestic currency which is extensively used internationally as a UNIT OF ACCOUNT (e.g. in the invoicing of trade), as a MEANS OF PAYMENT (e.g. an intervention currency) and as a STORE OF VALUE (espe- cially as a reserve currency). See also: sterling area sterling area (F0) The group of countries, mainly of the Commonwealth, defined in the Exchange Control Act 1947 of the UK, which pegged their currencies to sterling and held their foreign exchange balances in sterling. It arose out of the dominance of the UK economy before 1914 but declined in the 1950s when many of these countries diversi- fied their reserves, much to the relief of the UKwhich was often threatened with the sale of such sterling holdings and a consequen- tial attack on the pound. To cope with these sterling balances, UK governments succes- sively negotiated dollar guarantees in Basle in 1968 and 1977. Today, few countries can be said to be in the sterling area. See also: overseas sterling area References Strange, S. (1971) Sterling and British Policy: A Political Study of an Interna- tional Currency in Decline, Oxford: Ox- ford University Press. sterling commercial paper (G1) Commercial bills of exchange denomi- nated in sterling which are short term and negotiable. These are popular with firms seeking an additional source of finance for WORKING CAPITAL and with institutional investors wanting a short-term investment. sterling M3 (E4) Broad definition of the MONEY SUPPLY now known as M3. It is measured as M1 plus private sector sterling time bank deposits plus private sector holdings of sterling bank CERTIFICATES OF DEPOSIT. It was used to target the UK money supply in 1979– 85. Overshooting of targets for its growth has made it less useful for policy making. See also: M3c sterling warrant into gilt-edged stock (G1) An OPTION to buy or sell a specific gilt stock which was introduced in July 1987 in London. They have a life of up to twelve months. They are popular with securities houses as a hedging device. Gilt options are also traded by the LONDON INTERNA- TIONAL FINANCIAL FUTURES EXCHANGE and the INTERNATIONAL STOCK EXCHANGE. sticky price (D0) A price with limited flexibility. The princi- © 2002 Donald Rutherford pal examples of these are money wage rates inflexible downwards and interest rates with a minimum level. Prices of this kind are fundamental to the KEYNESIAN macroeconomic model. Seealso:fixprice;liquiditytrap References Barro, R. and Grossman, H. (1976) Money, Employment and Inflation, Cam- bridge and New York: Cambridge Uni- versity Press. Stigler, George Joseph, 1911–91 (B3) A leading twentieth-century US microeco- nomist. After an education at Washington, Northwestern and Chicago Universities, he became a professor at Brown Univer- sity in 1946 and then was professor at Columbia from 1947 to 1958 and subse- quently at Chicago from 1958 to 1981. Also, he worked for the NATIONAL BUREAU OF ECONOMIC RESEARCH from 1943 to 1959. He was awarded the NOBEL PRIZE FOR ECONOMICS in 1982 for his theory of economic regula- tion. His PhD thesis, supervised by Frank KNIGHT and published as Production and Distribution Theories (1941), began his extensive writings on the history of eco- nomic thought, as is evident in his Essays in the History of Economics (1965). But his eminence is derived from a lifetime of work on microeconomics, beginning with The Theory of Price (1942) and continuing with more specialized topics, e.g. his em- pirical refutation of the KINKED DEMAND CURVE (Journal of Political Economy Octo- ber, 1947) which challenged many writers on the subject. An article on information in labour markets (Journal of Political Economy, Supplement October, 1962) in- spired much work on search models of unemployment. His contribution to the economics of regulation is notable: con- troversially, he has held that regulatory agencies act in the producer’s, and not the consumer’s, interest. Stiglitz, Joseph Eugene 1943– (B3) Born in Gary, Indiana and educated at Amherst College. He has held chairs at Yale (1967–74), Stanford (1974–76, 1976– 79) and Princeton (1979–88) Universities. Chairman of the Council of Economic Advisers from 1995 to 1997. John Bates Clark Medal 1979; NOBEL PRIZE FOR ECONOM- ICS , with AKERLOF and SPENCE, in 2001. A cen- tral theme of his work has been incomplete information and uncertainty and their applications to labour, credit and agricultural markets. Also noted for his work on public finance; his Lectures in Public Economics written with A.B. Atkin- son (1980) quickly became a leading text- book. Through his work at the World Bank since 1997 he has become a tren- chant critic of the free market philosophy of the World Bank and the IMF. stochastic process (C1) A distribution with random probability that can be analysed statistically. stochastic term (C1) A random variable. See also: disturbance term stock adjustment principle (E2) The adjustment made to the ACCELERATOR PRINCIPLE to allow for unused capacity. The accelerator equation would produce too high a prediction of the required level of net investment if the amount of excess capacity were not subtracted. stock and flow concepts (E0, M4) A stock (e.g. wealth) is measured at a point in time; a flow (e.g. income) is measured over a period. A BALANCE SHEET uses stock concepts; a PROFIT AND LOSS AC- COUNT , flow concepts. This distinction, crucial to MACROECONOMICS, is increasingly used in the analysis of UNEMPLOYMENT. stock borrowing (G1) see share borrowing stock buy-back (G3) see stock repurchase stock exchange (G1) A physical and electronic market in which government BONDS and the SECURITIES of companies are regularly traded. The world’s leading exchanges are usually com- © 2002 Donald Rutherford pared in terms of the volume and dollar value of stocks traded, the range of financial products marketed and the num- ber of members entitled to trade. See also: International Stock Exchange; NationalAssociationofSecuritiesDealers AutomatedQuotationSystem References Goldenberg, S. (1986) Trading inside the World’s Leading Stock Exchanges, Lon- don: Sedgwick & Jackson. Stock Exchange Automated Quotation System (G1) A screen-based dealing system which al- lows all MARKET-MAKERS in a particular security to display their buying and selling prices to all users simultaneously. For a screen price quotation, there must be a minimum of 1,000 shares; the system is open from 9 a.m. to 5 p.m., Monday to Friday. This system had to be introduced in London in 1986 after DEREGULATION of the Stock Exchange. stock externality (Q0) SOCIAL COSTS resulting from the stock rather than the flow of pollution; for example, as the consequence of the decay of a stock. stockholder diffusion (G1, L2) The extent to which ownership of a company/corporation is spread amongst several investors. See also: wider share ownership Stockholm School (B1, B2) A group of Swedish economists, particu- larly MYRDAL, OHLIN, LINDAHL and HAMMERS- KOLD , who developed their own macro- economic theory and policy in the 1920s and 1930s. Although there are certain similarities with the work of KEYNES, this school was particularly noted for its use of the dynamic method, introducing the dis- tinction between EX ANTE and EX POST values of variables. Its principal recommendation was the use of FISCAL POLICY as a means of reducing unemployment. These economists were the lineal descendants of WICKSELL. Seealso:exantevariables;expostvari- ables References Hansson, B.A. (1982) The Stockholm School and the Development of the Dy- namic Method, London: Routledge. Sandelin, B. (ed.) (1991) The History of Swedish Economic Thought, London and New York: Routledge. stock index arbitrage (G1) An investment strategy to gain from the difference between the prices included in stock indices on the futures market and the underlying cash value of stocks. stock index futures market (G1) US market for HEDGING and ARBITRAGE to minimize risks and maximize returns in the stock market. This Chicago-based market, inspired by Chicago commodity futures, started in 1980; New York now has a similar market. The item traded, stock indices, can be regarded as baskets of shares. Institutions and corporations have found them attractive as portfolio insurance. stock market correction (G1) A small fall in the stock price index of a leading stock market. stock market crash (G1) A fall of 20 per cent or more in the index of a leading stock market. stock market indices (G1) see world stockmarketindices(AppendixB) stock market price index (G1) An indicator of the change in value of the stocks and shares traded on a particular stock exchange. This is calculated by add- ing together the price changes in the leading stocks. See Appendix B. stock–output ratio (M4) The ratio of stocks of raw materials, components and semi-finished goods to the output of a fir m. Stocks are held during the period of production to safe- guard against late delivery of supplies able to hold up production schedules. © 2002 Donald Rutherford stock ratios (M4) 1 Raw material stock divided by total turnover. 2 Work in progress divided by total turn- over. 3 Raw material stock divided by pur- chases. 4 Finished stock divided by total turn- over. stock repurchase (G3) The purchase by a company of the stocks or shares it has already issued to the investing public. A repurchase is popular with existing shareholders as the value of their investment is increased. It is regarded as a good practice when a company’s shares have a low price–earnings ratio. stocks (D0, G0) 1 Fixed interest securities issued by gov- ernments or companies. 2 Accumulated raw materials, semi-fin- ished goods and unsold finished goods. Changes in such stocks can be very volatile, being responsible for much of the annual change in the NATIONAL INCOME and the BALANCE OF PAYMENTS. See also: common stock Stolper–Samuelson theorem (F1) An international trade theorem which states that, when the relative price of one of two commodities increases, the factor of production used more intensively in its production has an increased real rate of return and the factor less intensively used has a lower rate of return. Sometimes called ‘a magnification effect’. References Stolper, W. and Samuelson, P.A. (1941) ‘Protection and real wages’, Review of Economic Studies 9: 58–73. Stone, John Richard Nicholas, 1913– 1991 (B3) Cambridge economist and statistician who pioneered much of NATIONAL INCOME analy- sis. He was educated at Cambridge Uni- versity and a member of the Central Statistical Office of the UK War Cabinet from 1940 to 1945 before returning to Cambridge to be Director of the Depart- ment of Applied Economics, from 1945 to 1955, and Professor of Financial Account- ing, from 1955 to 1980. His first work, an article on costs, appeared in Econometrica as early as 1936. Not only national income accounting but demand analysis, INPUT– OUTPUT ANALYSIS and aggregate consump- tion and savings functions have been central to his research. He was awarded the NOBEL PRIZE FOR ECONOMICS in 1984. References Deaton, A. (ed.) (1981) Essays in the Theory and Measurement of Consumer Behaviour in Honour of Sir Richard Stone, Cambridge: Cambridge Univer- sity Press. Stone, R. (1954–66) The Measurement of Consumers’ Expenditure and Behaviour in the United Kingdom, 1920–38, Cam- bridge: Cambridge University Press. —— (1959) Social Accounting and Econo- mic Models, London: Bowes & Bowes. stop–go (E3) UK macroeconomic policies of the 1950s and 1960s that alternately deflated and stimulated the economy. The expansion was often with a view to winning an imminent General Election; the retrench- ment, a recognition that the economy had become so overheated that the balance of payments was suffering. When FINE-TUNING became increasingly unsuccessful, stop–go policies disappeared. Seealso:Butskellism;politicalbusiness cycle store of value (E4) A function of money making it possible to defer the use of income received. In times of high INFLATION money ceases to have this use and non-monetary assets are preferred to money. storming (P2) Leaving most of a required amount of work to the weeks or days immediately preceding a production deadline. This was © 2002 Donald Rutherford a common practice under Soviet central planning. St Petersburg paradox (C7) A paradox of game theory identified by BERNOULLI and so called because of its first being stated in the Commentarii of the St Petersburg Academy. This paradox in a game of chance is that the mathematical expectation of gain is infinite but the fair price to the player is finite. Bernoulli’s approach to this problem was to replace mathematical expectation (probabilities of winning multiplied by monetary prices) by moral expectation (probabilities of win- ning multiplied by personal utilities). References Samuelson, P.A. (1977) ‘St Petersburg paradoxes: defanged, dissected and his- torically described’, Journal of Economic Literature 15: 24–55. straddle (G1) Buying a futures contract in one market and simultaneously selling it in another. straight bond (G0) A bond carrying a set rate of interest, redeemable over a set period at the price on the bond. straight-choice arbitration (J3, J5) see pendulum arbitration strategic bequest motive (D1) A calculated reason for making a bequest: the wealth is bestowed in a manner likely to influence conduct rather than express ALTRUISM. References Bornheim, B.D., Shleifer, A. and Sum- mers, L.H. (1985) ‘The strategic bequest motive’, Journal of Political Economy 93: 1045–76. strategic tax planning (H2) The use of TAX AVOIDANCE schemes to reduce tax liability. strategic trade theory (F1) A theory of international trade which aims to show that some forms of PROTECTION, including price controls on exports and export subsidies, can make an efficiency gain. References Meza, D. de (1989) ‘Not even strategic trade theory justifies export subsidies’, Oxford Economic Papers 41: 720–36. streaker (G1) see zero coupon bond stress test (G2) A test of CAPITAL ADEQUACY related to an optimal debt–equity funding mix. For a bank this shows the capacity of the bank’s capital to absorb potentially large losses. As a result of the test, there is an estimate of the amount of risk-free collateral re- quired. strike (J5) A work stoppage by a group of workers undertaken to enforce a particular de- mand, in most cases a wage increase. The legalization of TRADE UNIONS and, in some countries, the protection of them by mak- ing them immune from actions in tort/ delict for the losses caused by the strike have increased the incidence of strikes in the twentieth century. International com- parisons of strikes are difficult because of different definitions of strikes, especially whether to include political strikes and very small stoppages. It does seem that some countries, e.g. Switzerland and Nor- way, have few strikes, but others, e.g. Australia and Italy, have recorded a high level of strike activity in many years. Determinants of strike activity include a country’s industrial structure as some in- dustries (e.g. mining and transport) are particularly strike-prone, the COLLECTIVE BARGAINING system, the phase of the TRADE CYCLE and the extent of industrial CONCEN- TRATION in large organizations. In the UK in the 1960s and 1970s there were many strikes in General Election years as these invariably coincided with the breakdown of an incomes policy. The effects of strikes are difficult to calculate. There has to be a comparison between output on a ‘normal day’, which may be rare, and output on a © 2002 Donald Rutherford day that there was a stoppage; also the allocation of fixed costs may be too arbitrary to identify the extent of losses caused by strikes. Some would view strikes as an inevitable frictional cost of a collec- tive bargaining system. Certainly, in a few industries it is a well-tried tool in wage bargaining. Strikes can be PARETO OPTIMAL ex ante in that not striking would make the employer or trade union worse off, despite the strike being suboptimal ex post. See also: ex ante, ex post References Hayes, B. (1984) ‘Unions and strikes with asymmetric information’, Journal of La- bor Economics 2: 57–83. Hyman, R. (1972) Strikes, London: Fon- tana Collins. Jackson, M.P. (1988) Strikes: Industrial Conflict in Britain, USA and Australia, Hemel Hempstead: Harvester Wheat- sheaf. Knowles, K.G.J.C. (1952) Strikes: A Study in Industrial Conflict, Oxford: Basil Blackwell. strike-free deal (J5) A legally enforceable employment contract under which a TRADE UNION promises to refrain from striking for a period of time. This can take the form of a COLLECTIVE BARGAIN explicitly stated as being enforce- able under section 18 of the TRADE UNIONS AND LABOUR RELATIONS ACT or an individual contract with an employee. See also: strike strike price (G1) A pre-fixed price to buy or sell an OPTION. See also: put price strike replacement legislation (J5) Laws preventing an employer from hiring new workers during a STRIKE. These mea- sures attempt to increase job security and prevent dismissal but can reduce employ- ment. Canadian provinces including Que- bec, Ontario and British Columbia have such legislation. stripped security (G1) A mortgage-backed SECURITY which is se- parated into two securities – the principal and the interest. These have the attractions of being guaranteed by the US federal government and having a higher yield than treasury bonds. Changes in the rate of prepayments causes a fluctuation in their value. See also: mortgage strip strong efficiency (G1) The pricing of a security to take into account all publicly and privately available information. See also: weak efficiency strong equilibrium (C7) An EQUILIBRIUM such that there is no coalition of players which can gain by a simultaneous deviation from it. structural adjustment policy (O4) An attempt to effect a major change to an economy, often after an external shock. This policy aims to get the economy back to its pre-shock growth path, improving its BALANCE OF PAYMENTS over the medium term, i.e. about five years. The main policy instruments used are incentives to increase production, saving and investment in the public and private sectors, together with supporting monetary and budgetary poli- cies. Also, there are often specific policies for energy and agriculture. The oil-price increases of 1973 made policies of this kind an urgent priority in many economies. structural deficit (H6) The excess of a government’s expenditure over its income when that economy is at FULL EMPLOYMENT. structural inflation (E3) INFLATION caused by supply shortages espe- cially in the agricultural and exporting sectors of an economy. This type of infla- tion was thought to be the main cause of inflation in several Latin American econo- mies. © 2002 Donald Rutherford References Seers, D. (1962) ‘A theory of inflation and growth in underdeveloped economies based on the experience of Latin Amer- ica’, Oxford Economic Papers, New Ser- ies 14: 173–95. structural model (E1) A set of equations based on an economic theory showing endogenous variables as equal to a mixture of exogenous variables and constants. For example, if one of the equations is a CONSUMPTION FUNCTION, then C = a + cY, i.e. aggregate consumption C is equal to a constant a plus national income Y multiplied by the marginal propensity to consume c. structural unemployment (J6) UNEMPLOYMENT caused by a difference be- tween the structure of employment vacan- cies and the structure of unemployment, usually brought about by technological change. Unemployed persons have differ- ent skills from those being demanded by employers or are located in a different place from a potential employer. Critics of this concept regard it as only a case of extreme FRICTIONAL UNEMPLOYMENT. structure–conduct–performance model (L0) An approach to industrial economics, often applied to the study of OLIGOPOLY, showing how tastes, technology and insti- tutions produce market structures which dictate a firm’s conduct and subsequent performance. The aspects of ‘structure’ considered include CONCENTRATION, BRAND- ING and BARRIERS TO ENTRY; ‘conduct’ in- cludes deciding what to produce and at what prices and carrying out all the func- tions of a firm; ‘performance’ is measured by efficiency, profitability, technical pro- gress and employment creation. A policy conclusion of this model has been the demand for tougher ANTITRUST policy. References Mason, E.S. (1939) ‘Price and production policies of large-scale enterprises’, American Economic Review, Papers and Proceedings 29: 61–74. Reid, G.C. (1987) Theories of Industrial Organization, Oxford: Basil Blackwell. stub equity (G1) That part of the equity of a company retained by the vendor of that company when it is sold. A stake of this kind expresses confidence in the new manage- ment. See also: vendor finance Student’s t distribution (C1) A statistical distribution (named after W.S. Gosset, 1876–1937, a chemist working at the Guinness brewery in Dublin who used the pseudonym ‘Student’) which is calcu- lated as follows: t ¼ X Àm s p ðN À1Þ where X is the sample mean, m is the population mean, s is the sample standard deviation and N is the sample size. These t statistics are calculated for the testing of hypotheses. Seealso:chi-squareddistribution;null hypothesis stylized fact (E0) A fact of the real world simplified and made more abstract to be usable in an economic model. Each school of econom- ics has its favourite stylized facts, e.g. that there are steady long-term capital–output ratios and KUZNETS’ view that the AVERAGE PROPENSITY TO CONSUME is relatively constant over long periods. References Kaldor, N. (1961) ‘Capital accumulation and economic growth’, in F. Lutz (ed.) The Theory of Capital. Proceedings of a Conference held by the IEA, London: Macmillan. subordinate debt (G0) A loan with less claim to earnings or assets than SENIOR DEBT. © 2002 Donald Rutherford subsidiarity (H1) The principle of limiting the powers of the higher levels of government and devolving economic decision making as far as possi- ble downwards so that those affected by governmental actions have the maximum amount of control over them. Subsidiarity is constantly mentioned as a goal for the EUROPEAN COMMUNITY. See also: economic devolution subsidiary (L2) A subordinate part of a firm or other organization. MULTINATIONAL ENTERPRISES in particular have many subsidiaries which can specialize in marketing or production, or concentrate on a single activity different from the rest of the firm or pioneer new products and activities. subsidy (H2) A negative tax, a payment by the govern- ment to a firm or household. In most cases these are payments to a firm to reduce the cost of the labour or capital it employs. Subsidies can distort the pattern of production and, if used for a long period of time, will become increasingly expensive as the economy’s output will diverge more and more from the pattern of demand. Households can also be sub- sidized to reduce the cost of goods and services they purchase: many countries have subsidized food to increase the wel- fare of lower income households. The SO- VIET-TYPE ECONOMY made extensive use of subsidies. Seealso:correctivesubsidy;exportsub- sidy;Pigoviansubsidy;wagesubsidy subsistence (I3) The minimum amount of resources, parti- cularly food, that a worker needs to survive. By the time of Adam SMITH, the idea of subsistence in physiological terms had been replaced by psychological sub- sistence, which takes into account differ- ences in custom, the nature of societies and time periods. Social-policy-makers emphasize today that subsistence must include sufficient income to function in that society. Seealso:ironlawofwages;poverty References Townsend, P. (1979) Poverty in the UK, Harmondsworth: Penguin. subsistence theory of wages (J3) see iron law of wages substitute (D0) A good or service that a consumer regards as providing as much utility as its alter- native. The character of being a substitute can be established by measuring the CROSS PRICE ELASTICITY OF DEMAND between the two goods (services). If that elasticity measure is positive, then the goods (services) are substitutes. substitution effect (D0) see income and substitution effects sunbelt (L6, R3) An area of a country with new growing industries, e.g. California or the UK belt from Cambridge through Berkshire and Hampshire to Bristol. The expansion of such an area often poses a threat to the prosperity of an older industrial area. sunk cost (D0) Costs incurred by a firm which remain even if it leaves that industry. sunk cost fallacy (D2) The mistaken view that a firm should take into account the fixed costs it has incurred when deciding whether to continue with production. Concern for sunk costs rejects the marginal approach to decision making and ignores the notion of SHUTDOWN PRICE. sunrise industry (L6, R3) An industry based on new technology, e.g. a computer software industry. In the USA, these industries are concentrated in Cali- fornia and around Boston; in the UK, around Cambridge and in the Thames Valley. Seealso:sunbelt © 2002 Donald Rutherford sunset clause (L5) A statement in a regulation of the date on which it expires. sunspot theory (D6, E3) 1A TRADE CYCLE theory first enunciated by JEVONS which asserted that fluctuations in an economy are caused by periodic spots over the sun which cause bad weather, poor harvests, output decline and commercial crises. 2 Random phenomena, an extrinsic un- certainty without an effect on tastes, endowments or production possibilities. References Cass, D. and Shell, K. (1983) ‘Do sunspots matter?’, Journal of Political Economy 91: 193–227. Jevons, W.S. (1884) Investigations in Cur- rency and Finance, London: Macmillan. super-multiplier (E2) The double effect of investment as invest- ment increases income and the level of investment raises the equilibrium level of income. References Hicks, J.R. (1950) The Trade Cycle, Ox- ford: Oxford University Press. superneutrality (E6) Economic policies with no real effects as they only bring about nominal changes in an economy. supernormal profit (D0) Profits in excess of NORMAL PROFIT. This can occur under PERFECTCOMPETITION in the short run but is often a permanent feature of many MONOPOLISTIC and OLIGOPOLISTIC firms. supplementary cost (D0) The general expenses of running a firm which are incurred even if output is zero; a term used by MARSHALL. Seealso:fixedcost;primecost Supplementary Financing Facility (F3) The provision by the INTERNATIONAL MONE- TARY FUND in February 1979 of $7.8 billion of special drawing rights to add further financial help when a country is suffering from a structural problem with its balance of payments. supplementary special deposits scheme (E5) see ‘corset’ supplier-induced demand (D0) Demand for a good or service determined by the producer because of the consumer’s ignorance of the need for it. The best example is medical services where consu- mers lack the knowledge required to diagnose a condition and prescribe a treatment. supply control (D2, Q1) A reduction in production undertaken to maintain or increase prices and producers’ incomes. This policy, much used in the agricultural sectors of a number of econo- mies, has been criticized for its effects on efficiency and land values. Seealso:CommonAgriculturalPolicy; set aside supply curve (D0) 1 The relationship between product prices and quantities supplied in a product mar- ket, holding all other factors constant. 2 The relationship between amounts of a FACTOR OF PRODUCTION and its peculiar factor price – wage rate, RENT or RATE OF INTEREST . It shows how much is supplied at each price. © 2002 Donald Rutherford [...]... M.J ( 199 6) Frontiers of tax reform, Stanford, CA: Hoover Institution Press Feldstein, M.S ( 197 6) ‘On the theory of tax reform’, Journal of Public Economics 6: 77–104 Kay, J.A ( 199 0) ‘Tax policy: a survey’, Economic Journal 100: 18–75 Pechman, J ( 198 9) Tax Reform: The Rich and the Poor, London: Harvester Wheatsheaf Tax Reform Act 198 6 (H2) US federal statute that undertook the sweeping reform of the... Expansion Act 196 2 (F1) US federal trade statute concerned with the liberalization of trade See also: Kennedy Round trade-off (D0) The relationship between two inversely connected variables such that more of one means less of another Trade-offs occur in many parts of both microeconomics and macroeconomics, e.g the trade-off between work and leisure, between consumption of one good and of another of a consumer... Marshall, A ( 192 0) Principles of Economics, 8th edn, London: Macmillan Ricketts, M ( 199 4) The economics of business enterprise: an introduction to economic organisation and the theory of the firm, 2nd edn, New York, London and Toronto: Simon and Schuster; Harvester Wheatsheaf Stigler, G.I ( 195 2) The Theory of the Firm, rev edn, New York: Macmillan Williamson, O.E ( 196 3) Economics of Discretionary Behavior:... G.R ( 198 9) ‘Taxation and the Tiebout model: the differential effects of head taxes, taxes on land rents, and property taxes’, Journal of Economic Literature 27 (September): 1 098 –1146 Oates, W.Y ( 196 9) ‘The effect of property taxes and local public spending on property values: an empirical study of tax capitalization and the Tiebout hypothesis’, Journal of Political Economy 77: 95 7–71 Tiebout, C ( 195 6)... money See also: flow of funds account References Purvis, D and Myhrman, J ( 198 2) ‘James Tobin’s contribution to economics , Scandinavian Journal of Economics 84: 61–88 Tobin, J ( 197 4 and 197 5) Essays in Economics, Vols I and II, Cambridge, MA: MIT Press —— ( 197 4) The New Economics: One Decade Older, Princeton, NJ: Princeton University Press Tobin’s Q (M2) The ratio of the market value of a firm’s assets... analogy of good household management for such policies and is thus the contemporary expounder of Gladstonian finance Sir Geoffrey Howe in his first Budget speech of 197 9 outlined the programme of Thatcherism in his four principles: the strengthening of economic incentives, the reduction of the burden of financing the public sector, the reduction in the role of the state to increase freedom of individual... period Tinbergen, Jan, 190 3 94 (B3) Prominent Dutch econometrician who, after studying physics at Leiden University and gaining a PhD for a thesis on extremum problems in economics and physics, conducted business cycle research from 192 9 to 194 5 at the Dutch Central Bureau of Statistics He was Director of the Netherlands Central Planning Bureau from 194 5 to 195 5, Professor of Development Planning at... of INDIRECT TAXATION is necessary if the goal of unimpeded movement of goods is to be achieved References European Parliament ( 199 0) The Economic Consequence of Fiscal Harmonization in Europe, Luxemburg: Office for Publications of the European Communities Shibata, H ( 196 9) Fiscal Harmonization under Freer Trade: Principles and their Applications to a Canada-US Free Trade Area, Toronto: University of. .. prodigal in many years theory of clubs (H4) An explanation of the nature of CLUB GOODS sharing some of the characteristics of PUBLIC GOODS without non-excludability This theory can be traced back to PIGOU and KNIGHT; recent writers on this subject include BUCHANAN and Tiebout References Johnson, C ( 199 1) The Economy under Mrs Thatcher, 197 9 90 , Harmondsworth: Penguin Thompson, G ( 198 6) The Conservatives’... market forces Mrs Margaret Thatcher in 197 0 as UK Secretary of State for Education, by abolishing free school milk, gained the former reputation; as Prime Minister of the UK from 197 9 to 199 0, her emphasis on monetary control (instead of extensive government intervention backed by public funds), on the PRIVATIZATION of nationalized industries and on the removal of LABOUR MARKET RIGIDITIES expressed her . chairs at Yale ( 196 7–74), Stanford ( 197 4–76, 197 6– 79) and Princeton ( 197 9–88) Universities. Chairman of the Council of Economic Advisers from 199 5 to 199 7. John Bates Clark Medal 197 9; NOBEL PRIZE. Central Statistical Office of the UK War Cabinet from 194 0 to 194 5 before returning to Cambridge to be Director of the Depart- ment of Applied Economics, from 194 5 to 195 5, and Professor of Financial Account- ing,. became a professor at Brown Univer- sity in 194 6 and then was professor at Columbia from 194 7 to 195 8 and subse- quently at Chicago from 195 8 to 198 1. Also, he worked for the NATIONAL BUREAU OF ECONOMIC