Abu Yahya's definitions
phenomenon in which greater input of effort, money, etc. yields smaller results. Crucial part of the idea is that if you're using x to get y results (where y is the thing you want). then additional input a will yield additional results b, but not in the same proportion as before.
On average, before, you put in x to get y, so your yield was y/x. But if you increase x by amount a, then your results will be y + b, where
(y + b)/(x + a) < y/x
and this will only get worse.
Diminishing marginal returns (DMR) is used to explain why the supply curve in economics slopes upward, i.e., increasing the quantity supplied requires an increased price of most things.
Sometimes DMR is more than offset by "economies of scale," which allows more of a thing to be supplied more cheaply than a small amount.
On average, before, you put in x to get y, so your yield was y/x. But if you increase x by amount a, then your results will be y + b, where
(y + b)/(x + a) < y/x
and this will only get worse.
Diminishing marginal returns (DMR) is used to explain why the supply curve in economics slopes upward, i.e., increasing the quantity supplied requires an increased price of most things.
Sometimes DMR is more than offset by "economies of scale," which allows more of a thing to be supplied more cheaply than a small amount.
At first his flowers and treats swept her off her feet, but then he had to do more and more lavish things to please her. It was a classic case of diminishing marginal returns.
by Abu Yahya June 3, 2009
Get the diminishing marginal returns mug.*noun*, term used in economics to refer to the New Classical economics. The fresh water school was lead by Robert E. Lucas, Thomas J. Sargent, and Robert Barro; its position was that fiscal policy and monetary policy are doomed to be ineffective, since they rely on "fooling the public."
Instead, they argued that even tax cuts had no stimulus effect (in contrast to "supply side economics"), and of course they were resolutely opposed to government spending. Instead, the fresh water school maintained that a recession was caused by markets adjusting to a technology shock to create a structurally different economic system. The best thing to do was to allow the markets to restructure industry on their own.
The fresh water school was known for their support of the "rational expectations hypothesis" (REH) and "real business cycle" (RBC) theory.
Instead, they argued that even tax cuts had no stimulus effect (in contrast to "supply side economics"), and of course they were resolutely opposed to government spending. Instead, the fresh water school maintained that a recession was caused by markets adjusting to a technology shock to create a structurally different economic system. The best thing to do was to allow the markets to restructure industry on their own.
The fresh water school was known for their support of the "rational expectations hypothesis" (REH) and "real business cycle" (RBC) theory.
But lately, a ...school of skeptics who think the Government usually just gums things up is gaining attention and influence. The skeptics are known as the "fresh water school," less for the purity of their thought than for their origins at universities along the shores of the Great Lakes.
"'Fresh Water' Economists Gain," *New York Times*, 23 July 1988
"'Fresh Water' Economists Gain," *New York Times*, 23 July 1988
by Abu Yahya March 5, 2009
Get the fresh water school mug.Latin, "where is the benefit?" A type of logical fallacy in which one claims one didn't do something bad because it was not in one's interests to do so. An example would be, "Why would I steal from the cash register? It's going to hurt the business if I do, and then I might lose my job."
The argument is usually used on behalf of someone else: for example, Ludo Martens (1995) argues that Stalin could not possibly have massacred millions of Russians because he needed them to fight WW2; Fogel & Engermann claimed* that American slavery was not very bad because it was in the best interests of slaveowners to have content slaves.
The argument is a fallacy because it assumes that all relevant motives of the actor are well-established, and lead away from the act. It does not account for motives like personal hatred, shame, fear, spite, ideology, and so on.
________________________
* In *Time on the Cross* (1971); the book was conclusively debunked by David & Stampp, *Reckoning with Slavery* (1976).
The argument is usually used on behalf of someone else: for example, Ludo Martens (1995) argues that Stalin could not possibly have massacred millions of Russians because he needed them to fight WW2; Fogel & Engermann claimed* that American slavery was not very bad because it was in the best interests of slaveowners to have content slaves.
The argument is a fallacy because it assumes that all relevant motives of the actor are well-established, and lead away from the act. It does not account for motives like personal hatred, shame, fear, spite, ideology, and so on.
________________________
* In *Time on the Cross* (1971); the book was conclusively debunked by David & Stampp, *Reckoning with Slavery* (1976).
One frequently encounters *quis est beneficium?* arguments among Holocaust deniers of all stripes. Among such worthies it is claimed that Hitler/Stalin/Enver Pasha could not possibly have wanted to massacre all those millions because it was a nuisance to try.
by Abu Yahya February 14, 2009
Get the quis est beneficium mug.(FINANCE) the situation in which a derivatives trader with a short position is wrong about the behavior of the market. Having sold shares of stock he doesn't own, he is now compelled to buy them at a higher price than he sold them for (in order to reimburse whomever he borrowed the shares from).
If the short position was taken by writing naked options (i.e., issuing call options of stock the trader doesn't happen to have), then the trader has to buy shares of underlying stock in order to honor the options.
It's extremely expensive for traders to have to cover their shorts.
If the short position was taken by writing naked options (i.e., issuing call options of stock the trader doesn't happen to have), then the trader has to buy shares of underlying stock in order to honor the options.
It's extremely expensive for traders to have to cover their shorts.
The surprising stock rally came as a shock. Nicholas Leeson had been riding high, but now he was furiously covering shorts, and driving the share prices higher still. By closing bell, he was ruined.
by Abu Yahya May 5, 2010
Get the covering shorts mug.(ECONOMICS) Total unemployed plus discouraged workers, as a percent of the civilian labor force plus discouraged workers.
The US Bureau of Labor Statistics regularly publishes six estimates of unemployment. The others are U-1, U-2, U-3, U-5, and U-6. Eurostat publishes one monthly estimate of unemployment for the European Union, which is approximately midway between U-3 and U-4.
The unemployment statistics for the USA are collected through a monthly Current Population Survey (CPS) (also known as the household survey) and an establishment survey.
The US Bureau of Labor Statistics regularly publishes six estimates of unemployment. The others are U-1, U-2, U-3, U-5, and U-6. Eurostat publishes one monthly estimate of unemployment for the European Union, which is approximately midway between U-3 and U-4.
The unemployment statistics for the USA are collected through a monthly Current Population Survey (CPS) (also known as the household survey) and an establishment survey.
U-4 includes all individuals that are unemployed as well as people known as discouraged workers. These people are then reported as a percentage of the combined civilian labor force and discouraged workers. Discouraged workers are defined as unemployed workers who have searched for employment within the last 12 months that have cited an economic reason for no longer looking for work. These reasons could range from “There just aren’t any job openings in my area.” to “I keep getting turned down for interviews, so why bother?”
{Nebraska Workforce Trends|October 2009}
{Nebraska Workforce Trends|October 2009}
by Abu Yahya July 15, 2010
Get the U-4 mug.*noun*, efforts by the government to intentionally run a deficit in order to stimulate the economy during a recession. Loosely associated with Keynesian economics.
According to basic economic theory, recessions occur because there is a basic mismatch between aggregate demand and potential output. One approach for solving this is for the government to buy more goods and services than it has revenues to cover, thereby creating conditions in which effective demand is greater than the stock of goods currently in business inventory (given recessionary prices).
Under a stimulus, the jolt of extra money in circulation creates inflation, which has the effect of lowering real prices. Customers then respond to the {de facto} price reduction by buying more, which leads to more hiring, thence to more effective demand, thence to economic recovery.
Another reason fiscal policy stimulates the economy is that the private sector is not investing or consuming its own output. Increased taxes would simply reduce private consumption, so those cannot be increased; but spending is increased to fill the breach.
According to basic economic theory, recessions occur because there is a basic mismatch between aggregate demand and potential output. One approach for solving this is for the government to buy more goods and services than it has revenues to cover, thereby creating conditions in which effective demand is greater than the stock of goods currently in business inventory (given recessionary prices).
Under a stimulus, the jolt of extra money in circulation creates inflation, which has the effect of lowering real prices. Customers then respond to the {de facto} price reduction by buying more, which leads to more hiring, thence to more effective demand, thence to economic recovery.
Another reason fiscal policy stimulates the economy is that the private sector is not investing or consuming its own output. Increased taxes would simply reduce private consumption, so those cannot be increased; but spending is increased to fill the breach.
I think it is possible that fiscal policy will have even more 'oomph' in this situation," Christina Romer, who heads the Council of Economic Advisers, told an economics conference.
"When households and businesses are liquidity-constrained by reduced lending, any money put in their pockets is more likely to be spent," she said.
--Reuters, "White House's Romer: Stimulus may pack more punch" (3 March 2009)
"When households and businesses are liquidity-constrained by reduced lending, any money put in their pockets is more likely to be spent," she said.
--Reuters, "White House's Romer: Stimulus may pack more punch" (3 March 2009)
by Abu Yahya March 3, 2009
Get the fiscal policy mug.(ECONOMICS) the effective ratio whereby a country exchanges its goods with those of another country. Hence, a country that exports (say) mostly coffee and chocolate has to import almost everything else; if the price of chocolate and coffee declines, the country has no choice but to increase production of both, further reducing the price of both on world markets, and increasing the relative cost of everyhting it imports.
Terms of trade are determined notionally by the forex markets, but more fundamentally by (a) the markets for commodities, and (b) the ability of the country to finance transitions to other, higher-priced export goods.
Terms of trade are determined notionally by the forex markets, but more fundamentally by (a) the markets for commodities, and (b) the ability of the country to finance transitions to other, higher-priced export goods.
Terms of trade typically lead to very high real exchange rates for currencies like the Indian rupee.
by Abu Yahya May 18, 2010
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