People and concepts Flashcards
Hicks
Sir John Richard Hicks (8 April 1904 – 20 May 1989) was a British economist and one of the most important and influential economists of the twentieth century. The most familiar of his many contributions in the field of economics were his statement of consumer demand theory in microeconomics, and the IS/LM model (1937), which summarised a Keynesian view of macroeconomics. His book Value and Capital (1939) significantly extended general-equilibrium and value theory. The compensated demand function is named the Hicksian demand function in memory of him (https://en.wikipedia.org/wiki/John_Hicks)
Arrow-Debreu
In mathematical economics, the Arrow–Debreu model suggests that under certain economic assumptions (convex preferences, perfect competition, and demand independence) there must be a set of prices such that aggregate supplies will equal aggregate demands for every commodity in the economy. The model is central to the theory of general (economic) equilibrium and it is often used as a general reference for other microeconomic models (https://en.wikipedia.org/wiki/Arrow%E2%80%93Debreu_model) Their names are Kenneth Arrow and Gérard Debreu.
Pareto efficiency
Pareto efficiency, or Pareto optimality, is a state of allocation of resources in which it is impossible to make any one individual better off without making at least one individual worse off. The term is named after Vilfredo Pareto (1848–1923), an Italian engineer and economist who used the concept in his studies of economic efficiency and income distribution. The concept has applications in academic fields such as economics, engineering, and the life sciences (https://en.wikipedia.org/wiki/Pareto_efficiency)
First Welfare Theorem (from Foley and Michl 1999:241)
“that says that if an allocation arises as a market clearing equilibrium in an economy where all agents have full information about the qualities of commodities and the technology, where there are no external effects of one agent’s economic activities on other agents, that is, effects that cannot be bought and sold for a price on a market, and where there is vigorous competition, so that each agent takes the market price as given, then that allocation will be Pareto-efficient” (Foley and Michl 1999:241)
First Fundamental Theorem of Welfare Economics (Bowles 2004:213)
“proved independently by Arrow and Debreu (1954), which shows that if the exchange of goods or services is subject to complete contracts (called the market completeness assumption), all equi-libria supported by competitive exchange (namely the above process) are Pareto optimal. “ (Bowles 2004:213)
The Second Welfare Theorem (Bowles 2004:213)
“addresses matters of distribution. Suppose an additional requirement (the convexity assumption) is met, namely, that individuals’ indifference maps and firms’ production possibility sets are convex, ruling out increasing returns.* Then the Second Fundamental Theorem shows that given the convexity and market completeness assumptions, any Pareto-optimal allocation can be supported as a competitive equilibrium for some assignment of initial endowments.” (Bowles 2004:213)
- Where this assumption is violated, it may be the case that no competitive equilibrium exists.
Bounded rationality
“Bounded rationality is the idea that when individuals make decisions, their rationality is limited by the information they have, the cognitive limitations of their minds, and the time available to make the decision.” (https://en.wikipedia.org/wiki/Bounded_rationality)
Cobb-Douglas production function
“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 inputs” (https://en.wikipedia.org/wiki/Cobb%E2%80%93Douglas_production_function) see also Foley and Michl (1999:53ff.)
In short, what is the “Index number problem?”
“The “index number problem” refers to the difficulty of constructing a valid index when both price and quantity change over time.” (https://en.wikipedia.org/wiki/Index_%28economics%29#Index_number_problem)
What’s the goal of purpose of statistical mechanics according to Foley?
“These statistical theories eschew (deliberately avoid using) the goal of describing in detail the situation of all the subsystems that constitute a large system with many degrees of freedom in favor of drawing strong conclusions about the observable macro behavior of the system based on statistical considerations” (Foley, June 1, 1996 »Statistical Equilibrium Models in Economics.«)
rentier
a person living on income from property or investments (ORIGIN French, from rente ‘dividend.’)
Describe John Hicks’s IS-LM analysis.
Keynesian model “ Keynes himself allegedly acknowledged that Hicks had faithfully captured the most essential characteristics of his theory. Axel Leijonhufvud (1968) provides a detailed comparison of the IS/LM model and other “Keynesian” models with the theory of Keynes, as exposited in the text of the General Theory” (http://academic.reed.edu/economics/parker/314/Coursebook/Ch02.pdf) (see also Leijonhufvud, Axel. 1968. On Keynesian Economics and the Economics of Ke
ynes: A Study in Monetary Theory. New York: Oxford University Press)
Phillips curve?
“In economics, the Phillips curve is a historical inverse relationship between rates of unemployment and corresponding rates of inflation that result in an economy. Stated simply, decreased unemployment, (i.e., increased levels of employment) in an economy will correlate with higher rates of inflation.” (https://en.wikipedia.org/wiki/Phillips_curve)
What is equity?
In accounting and finance, equity is the difference between the value of the assets/interest and the cost of the liabilities of something owned. For example, if someone owns a car worth $15,000 but owes $5,000 on that car, the car represents $10,000 equity (https://en.wikipedia.org/wiki/Equity_(finance))
yield
In finance, the term yield describes the amount in cash (in percentage terms) that returns to the owners of a security, in the form of interest or dividends received from the security. Normally, it does not include the price variations, distinguishing it from the total return (https://en.wikipedia.org/wiki/Yield_(finance))
