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Economic model One reason, emphasized by Friedrich Hayek, is the claim that many of the true forces shaping the economy can never be captured in a single plan. This is an argument that cannot be made through a conventional (mathematical) economic model because it says that there are critical systemic-elements that will always be omitted from any top-down analysis of the economy. | https://en.wikipedia.org/wiki?curid=638834 |
Traditional economy A traditional economic system is based of customs, history and time-honored beliefs. A traditional economy is an economic system in which traditions, customs, and beliefs help shape the goods and services the economy produces, as well as the rules and manner of their distribution. Countries that use this type of economic system are often rural and farm-based. Also known as a subsistence economy, a traditional economy is defined by bartering and trading. A little surplus is produced and if any excess goods are made, they are typically given to a ruling authority or landowner. A pure traditional economy has had no changes in how it operates (there are few of these today). Examples of these traditional economies include those of the Inuit or those of the tea plantations in South India. Traditional economies are popularly conceived of as "primitive" or "undeveloped" economic systems, having tools or techniques seen as outdated. As with the notion of contemporary primitiveness and with modernity itself, the view that traditional economies are backward is not shared by scholars in economics and anthropology. Two current examples of a traditional or custom based economy are Bhutan and Haiti. Traditional economies may be based on custom and tradition, with economic decisions based on customs or beliefs of the community, family, clan, or tribe. | https://en.wikipedia.org/wiki?curid=640638 |
Minimax theorem A minimax theorem is a theorem providing conditions that guarantee that the max–min inequality is also an equality. The first theorem in this sense is von Neumann's minimax theorem from 1928, which was considered the starting point of game theory. Since then, several generalizations and alternative versions of von Neumann's original theorem have appeared in the literature. The minimax theorem was first proven and published in 1928 by John von Neumann, who is quoted as saying ""As far as I can see, there could be no theory of games … without that theorem … I thought there was nothing worth publishing until the Minimax Theorem was proved"". Formally, von Neumann's minimax theorem states: Let formula_1 and formula_2 be compact convex sets. If formula_3 is a continuous function that is concave-convex, i.e. Then we have that | https://en.wikipedia.org/wiki?curid=645602 |
Democratic capitalism is an economic system that combines capitalism and a strong welfare state curbing the excesses of individual freedom. The coexistence of capitalism and democracy, particularly in Europe, was supported by the creation of the modern welfare state in the post-war period which enabled a relatively stable political atmosphere and widespread support for social democracy as opposed to Soviet communism. | https://en.wikipedia.org/wiki?curid=647199 |
Managerial finance is the branch of finance that concerns itself with the managerial significance of finance techniques. It is focused on assessment rather than technique. The difference between a managerial and a technical approach can be seen in the questions one might ask of annual reports. The concern of a technical approach is primarily measurement. It asks: is money being assigned to the right categories? Were accounting principles followed? The purpose of a managerial approach, however, is to understand what the figures mean. is an interdisciplinary approach that borrows from both managerial accounting and corporate finance. Sound financial management creates value and organizational agility through the allocation of scarce resources amongst competing business opportunities. It is an aid to the implementation and monitoring of business strategies and helps achieve business objectives. To interpret financial results in the manner described above, managers use Financial analysis techniques. Managers also need to look at how resources are allocated within an organization. They need to know what each activity costs and why. These questions require managerial accounting techniques such as activity based costing. Managers also need to anticipate future expenses. To get a better understanding of the accuracy of the budgeting process, they may use variable budgeting. is also interested in determining the best way to use money to improve future opportunities to earn money and minimize the impact of financial shocks | https://en.wikipedia.org/wiki?curid=648115 |
Managerial finance To accomplish these goals managerial finance uses the following techniques borrowed from Corporate finance: | https://en.wikipedia.org/wiki?curid=648115 |
Consumer debt In economics, consumer debt is the amount owed by consumers (as opposed to amounts owed by businesses or governments). It includes debts incurred on purchase of goods that are consumable and/or do not appreciate. In macroeconomic terms, it is debt which is used to fund consumption rather than investment. The most common forms of consumer debt are credit card debt, payday loans, and other consumer finance, which are often at higher interest rates than long-term secured loans, such as mortgages. Long-term consumer debt is often considered fiscally suboptimal. While some consumer items such as automobiles may be marketed as having high levels of utility that justify incurring short-term debt, most consumer goods are not. For example, incurring high-interest consumer debt through buying a big-screen television "now", rather than saving for it, cannot usually be financially justified by the subjective benefits of having the television early. In many countries, the ease with which individuals can accumulate consumer debt beyond their means to repay has precipitated a growth industry in debt consolidation and credit counseling. The amount of debt outstanding versus the consumer's disposable income is expressed as the consumer leverage ratio. On a monthly basis, this debt ratio is advised to be no more than 20 percent of an individuals take-home pay | https://en.wikipedia.org/wiki?curid=650198 |
Consumer debt The interest rate charged depends on a range of factors, including the economic climate, perceived ability of the customer to repay, competitive pressures from other lenders, and the inherent structure and security of the credit product. Rates generally range from 0.25 percent above base rate, to well into double figures. is also associated with predatory lending, although there is much debate as to what exactly constitutes predatory lending. In recent years, an alternative analysis might view consumer debt as a way to increase domestic production, on the grounds that if credit is easily available, the increased demand for consumer goods should cause an increase of overall domestic production. The permanent income hypothesis suggests that consumers take debt to smooth consumption throughout their lives, borrowing to finance expenditures (particularly housing and schooling) earlier in their lives and paying down debt during higher-earning periods. Personal debt is on the rise, particularly in the United States and the United Kingdom. However, according to the US Federal Reserve, the US household debt service ratio is at the lowest level since its peak in the Fall of 2007. A country's private debt can be measured as a 'debt-to-GDP ratio', which is the total outstanding private debt of its residents divided by that nation's annual GDP. A variant is the consumer leverage ratio, which is the ratio of debt to personal income. | https://en.wikipedia.org/wiki?curid=650198 |
Fisc Under the Merovingians and Carolingians, the fisc (from Latin "fiscus," whence we derive "fiscal") applied to the royal demesne which paid taxes, entirely in kind, from which the royal household was meant to be supported, though it rarely was. Though their personal territory was at first enormous, the Merovingian kings, faced with stiff resistance to taxation from their Frankish and Gallo-Roman subjects and ill-served by their illiterate peers, relied on constant conquests to renew the "fisc" which they were in the habit of granting away to ensure continued fidelity among their followers. Once fresh Frankish conquests were no longer forthcoming, constant redivision of the "fisc" among heirs reduced Merovingian kingship to a cluster of competitive kinglets subsisting on inadequate resources. Annual contributions in kind, of grain, produce, fodder, etc., were unwieldy to transport and not easily convertible, so the restless habit of Merovingian kings moving from stronghold to stronghold was constantly encouraged. As time passed, "fisc" began to refer to money any Frankish knight had direct control over and would carry with him. Eventually, "fisc" referred to any knight's money holder. Nowadays, "fisc" is still used in French and in Romanian as a slang referring to the fiscal administration. In Spanish, the slang word "fisco" is also used. | https://en.wikipedia.org/wiki?curid=650998 |
Cooperative game theory In game theory, a cooperative game (or coalitional game) is a game with competition between groups of players ("coalitions") due to the possibility of external enforcement of cooperative behavior (e.g. through contract law). Those are opposed to non-cooperative games in which there is either no possibility to forge alliances or all agreements need to be self-enforcing (e.g. through credible threats). Cooperative games are often analysed through the framework of cooperative game theory, which focuses on predicting which coalitions will form, the joint actions that groups take and the resulting collective payoffs. It is opposed to the traditional non-cooperative game theory which focuses on predicting individual players' actions and payoffs and analyzing Nash equilibria. provides a high-level approach as it only describes the structure, strategies and payoffs of coalitions, whereas non-cooperative game theory also looks at how bargaining procedures will affect the distribution of payoffs within each coalition. As non-cooperative game theory is more general, cooperative games can be analyzed through the approach of non-cooperative game theory (the converse does not hold) provided that sufficient assumptions are made to encompass all the possible strategies available to players due to the possibility of external enforcement of cooperation | https://en.wikipedia.org/wiki?curid=657958 |
Cooperative game theory While it would thus be possible to have all games expressed under a non-cooperative framework, in many instances insufficient information is available to accurately model the formal procedures available to the players during the strategic bargaining process, or the resulting model would be of too high complexity to offer a practical tool in the real world. In such cases, cooperative game theory provides a simplified approach that allows the analysis of the game at large without having to make any assumption about bargaining powers. A cooperative game is given by specifying a value for every coalition. Formally, the coalitional game consists of a finite set of players formula_1, called the "grand coalition", and a "characteristic function" formula_2 from the set of all possible coalitions of players to a set of payments that satisfies formula_3. The function describes how much collective payoff a set of players can gain by forming a coalition, and the game is sometimes called a "value game" or a "profit game". Conversely, a cooperative game can also be defined with a characteristic cost function formula_4 satisfying formula_5. In this setting, players must accomplish some task, and the characteristic function formula_6 represents the cost of a set of players accomplishing the task together. A game of this kind is known as a "cost game". Although most cooperative game theory deals with profit games, all concepts can easily be translated to the cost setting | https://en.wikipedia.org/wiki?curid=657958 |
Cooperative game theory The "Harsanyi dividend" (named after John Harsanyi, who used it to generalize the Shapley value in 1963) identifies the surplus that is created by a coalition of players in a cooperative game. To specify this surplus, the worth of this coalition is corrected by the surplus that is already created by subcoalitions. To this end, the dividend formula_7 of coalition formula_8 in game formula_9 is recursively determined by formula_10 An explicit formula for the dividend is given by formula_11. The function formula_12 is also known as the Möbius inverse of formula_13. Indeed, we can recover formula_9 from formula_15 by help of the formula formula_16. Harsanyi dividends are useful for analyzing both games and solution concepts, e.g. the Shapley value is obtained by distributing the dividend of each coalition among its members, i.e., the Shapley value formula_17 of player formula_18 in game formula_9 is given by summing up a player's share of the dividends of all coalitions that she belongs to, formula_20. Let formula_21 be a profit game. The "dual game" of formula_21 is the cost game formula_23 defined as Intuitively, the dual game represents the opportunity cost for a coalition formula_25 of not joining the grand coalition formula_1. A dual profit game formula_27 can be defined identically for a cost game formula_6. A cooperative game and its dual are in some sense equivalent, and they share many properties. For example, the core of a game and its dual are equal | https://en.wikipedia.org/wiki?curid=657958 |
Cooperative game theory For more details on cooperative game duality, see for instance . Let formula_29 be a non-empty coalition of players. The "subgame" formula_30 on formula_25 is naturally defined as In other words, we simply restrict our attention to coalitions contained in formula_25. Subgames are useful because they allow us to apply solution concepts defined for the grand coalition on smaller coalitions. Characteristic functions are often assumed to be superadditive . This means that the value of a union of disjoint coalitions is no less than the sum of the coalitions' separate values: formula_34 whenever formula_35 satisfy formula_36. Larger coalitions gain more: formula_37. This follows from superadditivity. i.e. if payoffs are normalized so singleton coalitions have zero value. A coalitional game is considered simple if payoffs are either 1 or 0, i.e. coalitions are either "winning" or "losing". Equivalently, a simple game can be defined as a collection of coalitions, where the members of are called winning coalitions, and the others losing coalitions. It is sometimes assumed that a simple game is nonempty or that it does not contain an empty set. However, in other areas of mathematics, simple games are also called hypergraphs or Boolean functions (logic functions). A few relations among the above axioms have widely been recognized, such as the following (e.g., Peleg, 2002, Section 2 | https://en.wikipedia.org/wiki?curid=657958 |
Cooperative game theory 1): More generally, a complete investigation of the relation among the four conventional axioms (monotonicity, properness, strongness, and non-weakness), finiteness, and algorithmic computability has been made (Kumabe and Mihara, 2011), whose results are summarized in the Table "Existence of Simple Games" below. The restrictions that various axioms for simple games impose on their Nakamura number were also studied extensively. In particular, a computable simple game without a veto player has a Nakamura number greater than 3 only if it is a "proper" and "non-strong" game. Let "G" be a strategic (non-cooperative) game. Then, assuming that coalitions have the ability to enforce coordinated behaviour, there are several cooperative games associated with "G". These games are often referred to as "representations of G". The two standard representations are: The main assumption in cooperative game theory is that the grand coalition formula_1 will form. The challenge is then to allocate the payoff formula_53 among the players in some fair way. (This assumption is not restrictive, because even if players split off and form smaller coalitions, we can apply solution concepts to the subgames defined by whatever coalitions actually form.) A "solution concept" is a vector formula_54 that represents the allocation to each player. Researchers have proposed different solution concepts based on different notions of fairness | https://en.wikipedia.org/wiki?curid=657958 |
Cooperative game theory Some properties to look for in a solution concept include: An efficient payoff vector is called a "pre-imputation", and an individually rational pre-imputation is called an imputation. Most solution concepts are imputations. The stable set of a game (also known as the "von Neumann-Morgenstern solution" ) was the first solution proposed for games with more than 2 players. Let formula_21 be a game and let formula_68, formula_85 be two imputations of formula_21. Then formula_68 "dominates" formula_85 if some coalition formula_89 satisfies formula_90 and formula_91. In other words, players in formula_25 prefer the payoffs from formula_68 to those from formula_85, and they can threaten to leave the grand coalition if formula_85 is used because the payoff they obtain on their own is at least as large as the allocation they receive under formula_68. A "stable set" is a set of imputations that satisfies two properties: Von Neumann and Morgenstern saw the stable set as the collection of acceptable behaviours in a society: None is clearly preferred to any other, but for each unacceptable behaviour there is a preferred alternative. The definition is very general allowing the concept to be used in a wide variety of game formats. Let formula_21 be a game. The "core" of formula_21 is the set of payoff vectors In words, the core is the set of imputations under which no coalition has a value greater than the sum of its members' payoffs | https://en.wikipedia.org/wiki?curid=657958 |
Cooperative game theory Therefore, no coalition has incentive to leave the grand coalition and receive a larger payoff. For simple games, there is another notion of the core, when each player is assumed to have preferences on a set formula_102 of alternatives. A "profile" is a list formula_103 of individual preferences formula_104 on formula_102. Here formula_106 means that individual formula_18 prefers alternative formula_108 to formula_109 at profile formula_110. Given a simple game formula_9 and a profile formula_110, a "dominance" relation formula_113 is defined on formula_102 by formula_115 if and only if there is a winning coalition formula_8 (i.e., formula_117) satisfying formula_106 for all formula_119. The "core" formula_120 of the simple game formula_9 with respect to the profile formula_110 of preferences is the set of alternatives undominated by formula_113 (the set of maximal elements of formula_102 with respect to formula_113): The "Nakamura number" of a simple game is the minimal number of winning coalitions with empty intersection. "Nakamura's theorem" states that the core formula_120 is nonempty for all profiles formula_110 of "acyclic" (alternatively, "transitive") preferences if and only if formula_102 is finite "and" the cardinal number (the number of elements) of formula_102 is less than the Nakamura number of formula_9 | https://en.wikipedia.org/wiki?curid=657958 |
Cooperative game theory A variant by Kumabe and Mihara states that the core formula_120 is nonempty for all profiles formula_110 of preferences that have a "maximal element" if and only if the cardinal number of formula_102 is less than the Nakamura number of formula_9. (See Nakamura number for details.) Because the core may be empty, a generalization was introduced in . The "strong formula_138-core" for some number formula_139 is the set of payoff vectors In economic terms, the strong formula_138-core is the set of pre-imputations where no coalition can improve its payoff by leaving the grand coalition, if it must pay a penalty of formula_138 for leaving. Note that formula_138 may be negative, in which case it represents a bonus for leaving the grand coalition. Clearly, regardless of whether the core is empty, the strong formula_138-core will be non-empty for a large enough value of formula_138 and empty for a small enough (possibly negative) value of formula_138. Following this line of reasoning, the "least-core", introduced in , is the intersection of all non-empty strong formula_138-cores. It can also be viewed as the strong formula_138-core for the smallest value of formula_138 that makes the set non-empty . The "Shapley value" is the unique payoff vector that is efficient, symmetric, and satisfies monotonicity. It was introduced by Lloyd Shapley who showed that it is the unique payoff vector that is efficient, symmetric, additive, and assigns zero payoffs to dummy players | https://en.wikipedia.org/wiki?curid=657958 |
Cooperative game theory The Shapley value of a superadditive game is individually rational, but this is not true in general. Let formula_2 be a game, and let formula_54 be an efficient payoff vector. The "maximum surplus" of player "i" over player "j" with respect to "x" is the maximal amount player "i" can gain without the cooperation of player "j" by withdrawing from the grand coalition "N" under payoff vector "x", assuming that the other players in "i"'s withdrawing coalition are satisfied with their payoffs under "x". The maximum surplus is a way to measure one player's bargaining power over another. The "kernel" of formula_9 is the set of imputations "x" that satisfy for every pair of players "i" and "j". Intuitively, player "i" has more bargaining power than player "j" with respect to imputation "x" if formula_156, but player "j" is immune to player "i"'s threats if formula_157, because he can obtain this payoff on his own. The kernel contains all imputations where no player has this bargaining power over another. This solution concept was first introduced in . Let formula_2 be a game, and let formula_54 be a payoff vector. The "excess" of formula_68 for a coalition formula_161 is the quantity formula_162; that is, the gain that players in coalition formula_25 can obtain if they withdraw from the grand coalition formula_1 under payoff formula_68 and instead take the payoff formula_166. Now let formula_167 be the vector of excesses of formula_68, arranged in non-increasing order. In other words, formula_169 | https://en.wikipedia.org/wiki?curid=657958 |
Cooperative game theory Notice that formula_68 is in the core of formula_21 if and only if it is a pre-imputation and formula_172. To define the nucleolus, we consider the lexicographic ordering of vectors in formula_173: For two payoff vectors formula_174, we say formula_175 is lexicographically smaller than formula_176 if for some index formula_177, we have formula_178 and formula_179. (The ordering is called lexicographic because it mimics alphabetical ordering used to arrange words in a dictionary.) The "nucleolus" of formula_21 is the lexicographically minimal imputation, based on this ordering. This solution concept was first introduced in . Although the definition of the nucleolus seems abstract, gave a more intuitive description: Starting with the least-core, record the coalitions for which the right-hand side of the inequality in the definition of formula_181 cannot be further reduced without making the set empty. Continue decreasing the right-hand side for the remaining coalitions, until it cannot be reduced without making the set empty. Record the new set of coalitions for which the inequalities hold at equality; continue decreasing the right-hand side of remaining coalitions and repeat this process as many times as necessary until all coalitions have been recorded. The resulting payoff vector is the nucleolus. Introduced by Shapley in , convex cooperative games capture the intuitive property some games have of "snowballing" | https://en.wikipedia.org/wiki?curid=657958 |
Cooperative game theory Specifically, a game is "convex" if its characteristic function formula_21 is supermodular: It can be shown (see, e.g., Section V.1 of ) that the supermodularity of formula_21 is equivalent to that is, "the incentives for joining a coalition increase as the coalition grows" , leading to the aforementioned snowball effect. For cost games, the inequalities are reversed, so that we say the cost game is "convex" if the characteristic function is submodular. Convex cooperative games have many nice properties: Submodular and supermodular set functions are also studied in combinatorial optimization. Many of the results in have analogues in , where submodular functions were first presented as generalizations of matroids. In this context, the core of a convex cost game is called the "base polyhedron", because its elements generalize base properties of matroids. However, the optimization community generally considers submodular functions to be the discrete analogues of convex functions , because the minimization of both types of functions is computationally tractable. Unfortunately, this conflicts directly with Shapley's original definition of supermodular functions as "convex". | https://en.wikipedia.org/wiki?curid=657958 |
Staffing refers to finding the right person for the right job having right qualification,at the right time. It is the process of acquiring, deploying, and retaining a workforce of sufficient quantity and quality to create positive impacts on the organization’s effectiveness. In management, the meaning of staffing is an operation of recruiting the employees by evaluating their skills, knowledge and then offering them specific job roles accordingly. “is absolutely critical to the success of every company” Gail Hyland-Savage, COO, Michaelson, Connor, & Bowl. The Model is data that measures work activities, how many labor hours are needed and how employee time is spent. helps to find and hire people who are qualified for the job position and will benefit the company. It helps improve the quality and quantity of work done by the company since they have staffed the optimum people. Job satisfaction rates increase because everyone is well suited for their position and are happy to be doing their specialty of work. There will be a higher productive performance from the company since they have staffed the right people to do their jobs. It provides employees the opportunity for further growth and development. an organization requires both quantity and quality of the staff. The quantity is the head count. The organization forecasts workforce quantity requirements and then compare it to the available workforce. If the head count matches the requirement then the organization is fully staffed | https://en.wikipedia.org/wiki?curid=661641 |
Staffing If the requirement exceeds available staff, then the organization is understaffed. If the available staff exceeds the requirements, then the organization is overstaffed. Overstaffed means that the organization needs to stop hiring and maybe layoff. Understaffed means it is time to start the staffing. The quality is having the right person for the job. The right person should have a person/job and person/organization match. Person/job match involves both the KSAOs and the job’s task. KSAO is an acronym for knowledge, skills, abilities and other characteristics. Person/organization match is when the person has the same organizational values as the organization. The five core staffing actives are recruitment, selection, employment, training, and retaining. An effective recruiting process is the corner stone of an effective staffing system. If the recruiting process works you will get the workers that are needed. The first step of the recruiting process would be to defined goals and job description. Organizations assess jobs and job families through systematic study called job analysis, a process that describes and records job behaviors and activities. Job analysis is generally considered the backbone of an effective human resource management system, and it is particularly important in staffing functions of recruitment and selection, as well as assessing the level of job performance. Job analysis involves the collection of information about jobs in the organization (not the persons holding the jobs) | https://en.wikipedia.org/wiki?curid=661641 |
Staffing As such, the analysis focuses on duties, responsibilities, knowledge, skills, and other characteristics required to perform the job. Part of the recruiting process the organization will have to decide to recruit internally or externally. Internal recruiting is when an organization intends to fill a vacancy from within its existing workforce. External recruitment is when an organization looks to fill vacancies from applicants outside of the company. There are advantages and disadvantages of both methods of recruitment and can be used at the same time. Internal recruitment benefits are it is cheaper and faster to recruit staff internally and it promotes loyalty. The disadvantages are recruiting from within limits the chances of new innovations and you’ll be leaving a gap in the workforce. Even if you’ve recruited for a position internally, you’ll still have a gap in the workforce as you’ll need to find a replacement for the vacant position. If the organization chooses internal recruitment, there are some decision on how to communicate the job announcement. The choices are open, closed or hybrid. In an open recruitment system, all employees are made aware of the job vacancies and they can apply to the job. In a close recruitment system, only the employees that the organization is interested in knows about the job vacancy. In a hybrid recruitment system, the organization uses both open and close recruitment systems | https://en.wikipedia.org/wiki?curid=661641 |
Staffing External recruitment benefits are that it increases your chances of recruiting experienced and qualified candidates. The disadvantages are new recruits will have a limited understanding of the company and company culture and internal disputes are bound to arise if existing employees feel that they were more suited for the position. If the organization chooses external recruitment, they will have to decide how to get the job out there so it can be filled. There is a wide verity of ways that the organization can do that. Some examples are website, employment agencies, job fair, social networks, and employee referrals. Selection is an important part of the staffing process and if done wrong the organization could lose great candidates. The purpose of this selection process is to determine whether a candidate is suitable for employment in the organization or not. This process starts with the review of the job application, résumé, and cover letter of the job candidates. The next step is do an initial interview to eliminate the unqualified candidates. The next steps are to reduce the candidates to get the finalist for the job. These steps include testing, structured interview and contingent assessment. The testing can include personality, ability and intelligence test. A structured interview would have specific questions that would be ask and it is with someone in the organization that knows the job. The contingent assessment is the last step and it includes drug test and medical exams | https://en.wikipedia.org/wiki?curid=661641 |
Staffing Employment is the process of hiring individual that was selected in the section process. The first thing that the organization would do is to proposal a job offer. The job offer should include starting date, duration of contract, compensation, starting rate, benefits and hours. Next thing the organization should do is get ready for the new employee’s arrival. Like when Sterling Solutions CEO Stephen Carter was asked “What steps should a business have in place to ensure new employees get off on the right foot?” He answered “Ensure that on the first day of employment, the employee is set up with all required tools to do their job: computer, laptop, phone, email, security badge, office key, etc.” After selection of an employee, the important part of the programmed is to provide training to the new employee. With the various technological changes, the need for training employees is being increased to keep the employees in touch with the various new developments. can be influenced by how staffers are trained and/or the type of training they receive. Examples: HR Activities in a Model Training is generally classified into two types, on the job and off the job. Examples of Training Programs: Employee’s can leave jobs for a variety of different reasons. It's important for employers to listen to the needs of the employee and make them feel valued. Employers need to create a positive work culture and motivating practices into their organization in order to keep employees | https://en.wikipedia.org/wiki?curid=661641 |
Staffing Retention methods have a positive impact on the organization’s turnover rate: Life Work Solutions is a provider of staffing retention and has provided the following information on turnover rate: Organizational culture is simply defined as the values and behaviors that contribute to the unique environment of the organization. The spoken and unspoken rules of an organization on how they function with each other. Culture New hires need time to adapt to a new work environment. Organization need to understand this and rushing doesn’t help. New hires need to be adaptable to the new work culture and not try to reinforce the prior work culture into the new one. Employees are more likely to enjoy their time working if they enjoy the company work culture. What to consider: Using a staffing agency has a lot of benefits and more and more companies are taking advantage of their services. It is cost effective, saves time and expertise. Companies save a lot of money using a staffing agency because they do not have to spend extra money on employee recruitment and they do not have to fund any of the screenings new hires have to go through. Using a staffing agency eliminates the need for companies to do extensive advertisements about the positions they are hiring for. They save time by avoiding having to spend a large amount of time searching for applicants and recruiting new people. agencies provide such a large network of job candidates so it is easy to find people to fill the jobs | https://en.wikipedia.org/wiki?curid=661641 |
Staffing agencies are the experts at staffing companies. They have all of the tools and knowledge to find the perfect applicants for the jobs each company needs to fill. agencies have a wide network available of contacts who are looking for jobs. If a company has an unexpected need to fill a position, a staffing agency can usually quickly find them someone. How organizations benefit from staffing firms: | https://en.wikipedia.org/wiki?curid=661641 |
Environment minister An environment minister (sometimes minister of the environment or secretary of the environment) is a cabinet position charged with protecting the natural environment and promoting wildlife conservation. The areas associated with the duties of an "environmental minister" depends largely of the needs of an individual countries or states. The world's first minister of the environment was the British Politician Peter Walker from the Conservative Party. He was appointed in 1970. | https://en.wikipedia.org/wiki?curid=663574 |
Econophysics is a heterodox interdisciplinary research field, applying theories and methods originally developed by physicists in order to solve problems in economics, usually those including uncertainty or stochastic processes and nonlinear dynamics. Some of its application to the study of financial markets has also been termed statistical finance referring to its roots in statistical physics. is closely related to social physics. Physicists' interest in the social sciences is not new; Daniel Bernoulli, as an example, was the originator of utility-based preferences. One of the founders of neoclassical economic theory, former Yale University Professor of Economics Irving Fisher, was originally trained under the renowned Yale physicist, Josiah Willard Gibbs. Likewise, Jan Tinbergen, who won the first Nobel Memorial Prize in Economic Sciences in 1969 for having developed and applied dynamic models for the analysis of economic processes, studied physics with Paul Ehrenfest at Leiden University. In particular, Tinbergen developed the gravity model of international trade that has become the workhorse of international economics. was started in the mid-1990s by several physicists working in the subfield of statistical mechanics | https://en.wikipedia.org/wiki?curid=664332 |
Econophysics Unsatisfied with the traditional explanations and approaches of economists – which usually prioritized simplified approaches for the sake of soluble theoretical models over agreement with empirical data – they applied tools and methods from physics, first to try to match financial data sets, and then to explain more general economic phenomena. One driving force behind econophysics arising at this time was the sudden availability of large amounts of financial data, starting in the 1980s. It became apparent that traditional methods of analysis were insufficient – standard economic methods dealt with homogeneous agents and equilibrium, while many of the more interesting phenomena in financial markets fundamentally depended on heterogeneous agents and far-from-equilibrium situations. The term "econophysics" was coined by H. Eugene Stanley, to describe the large number of papers written by physicists in the problems of (stock and other) markets, in a conference on statistical physics in Kolkata (erstwhile Calcutta) in 1995 and first appeared in its proceedings publication in Physica A 1996. The inaugural meeting on econophysics was organised in 1998 in Budapest by János Kertész and Imre Kondor. The first book on econophysics was by R. N. Mantegna & H. E. Stanley in 2000. The almost regular meeting series on the topic include: ECONOPHYS-KOLKATA (held in Kolkata & Delhi), Colloquium, ESHIA/ WEHIA | https://en.wikipedia.org/wiki?curid=664332 |
Econophysics In recent years network science, heavily reliant on analogies from statistical mechanics, has been applied to the study of productive systems. That is the case with the works done at the Santa Fe Institute in European Funded Research Projects as Forecasting Financial Crises and the Harvard-MIT Observatory of Economic Complexity If "econophysics" is taken to denote the principle of applying statistical mechanics to economic analysis, as opposed to a particular literature or network, priority of innovation is probably due to Emmanuel Farjoun and Moshé Machover (1983). Their book "Laws of Chaos: A Probabilistic Approach to Political Economy" proposes "dis"solving (their words) the transformation problem in Marx's political economy by re-conceptualising the relevant quantities as random variables. If, on the other hand, "econophysics" is taken to denote the application of physics to economics, one can consider the works of Léon Walras and Vilfredo Pareto as part of it. Indeed, as shown by Bruna Ingrao and Giorgio Israel, general equilibrium theory in economics is based on the physical concept of mechanical equilibrium. has nothing to do with the "physical quantities approach" to economics, advocated by Ian Steedman and others associated with neo-Ricardianism. Notable econophysicists are Jean-Philippe Bouchaud, Bikas K Chakrabarti, J. Doyne Farmer, Diego Garlaschelli, Dirk Helbing, János Kertész, Francis Longstaff, Rosario N. Mantegna, Matteo Marsili, Joseph L. McCauley, Enrico Scalas, Didier Sornette, H | https://en.wikipedia.org/wiki?curid=664332 |
Econophysics Eugene Stanley, Victor Yakovenko and Yi-Cheng Zhang. Particularly noteworthy among the formal courses on econophysics is the one offered by Diego Garlaschelli at the Physics Department of the Leiden University, from where the first Nobel-laureate in economics Jan Tinbergen came. From September 2014 King's College has awarded the first position of Full Professor in Econophysics. Basic tools of econophysics are probabilistic and statistical methods often taken from statistical physics. Physics models that have been applied in economics include the kinetic theory of gas (called the kinetic exchange models of markets ), percolation models, chaotic models developed to study cardiac arrest, and models with self-organizing criticality as well as other models developed for earthquake prediction. Moreover, there have been attempts to use the mathematical theory of complexity and information theory, as developed by many scientists among whom are Murray Gell-Mann and Claude E. Shannon, respectively. For potential games, it has been shown that an emergence-producing equilibrium based on information via Shannon information entropy produces the same equilibrium measure (Gibbs measure from statistical mechanics) as a stochastic dynamical equation, both of which are based on bounded rationality models used by economists. The fluctuation-dissipation theorem connects the two to establish a concrete correspondence of "temperature", "entropy", "free potential/energy", and other physics notions to an economics system | https://en.wikipedia.org/wiki?curid=664332 |
Econophysics The statistical mechanics model is not constructed a-priori - it is a result of a bounded rational assumption and modeling on existing neoclassical models. It has been used to prove the "inevitability of collusion" result of Huw Dixon in a case for which the neoclassical version of the model does not predict collusion. Here the demand is increasing, as with Veblen goods or stock buyers with the "hot hand" fallacy preferring to buy more successful stocks and sell those that are less successful. Quantifiers derived from information theory were used in several papers by econophysicist Aurelio F. Bariviera and coauthors in order to assess the degree in the informational efficiency of stock markets. In a paper published in Physica A Zunino et al. use an innovative statistical tool in the financial literature: the complexity-entropy causality plane. This Cartesian representation establish an efficiency ranking of different markets and distinguish different bond market dynamics. Moreover, the authors conclude that the classification derived from the complexity-entropy causality plane is consistent with the qualifications assigned by major rating companies to the sovereign instruments. A similar study developed by Bariviera et al. explore the relationship between credit ratings and informational efficiency of a sample of corporate bonds of US oil and energy companies using also the complexity–entropy causality plane. They find that this classification agrees with the credit ratings assigned by Moody's | https://en.wikipedia.org/wiki?curid=664332 |
Econophysics Another good example is random matrix theory, which can be used to identify the noise in financial correlation matrices. One paper has argued that this technique can improve the performance of portfolios, e.g., in applied in portfolio optimization. There are, however, various other tools from physics that have so far been used, such as fluid dynamics, classical mechanics and quantum mechanics (including so-called classical economy, quantum economics and quantum finance), and the path integral formulation of statistical mechanics. The concept of economic complexity index, introduced by the MIT physicist Cesar A. Hidalgo and the Harvard economist Ricardo Hausmann and made available at MIT's Observatory of Economic Complexity, has been devised as a predictive tool for economic growth. According to the estimates of Hausmann and Hidalgo, the ECI is far more accurate in predicting GDP growth than the traditional governance measures of the World Bank. There are also analogies between finance theory and diffusion theory. For instance, the Black–Scholes equation for option pricing is a diffusion-advection equation (see however for a critique of the Black–Scholes methodology). The Black–Scholes theory can be extended to provide an analytical theory of main factors in economic activities. Papers on econophysics have been published primarily in journals devoted to physics and statistical mechanics, rather than in leading economics journals. Mainstream economists have generally been unimpressed by this work | https://en.wikipedia.org/wiki?curid=664332 |
Econophysics Some economists, including Mauro Gallegati, Steve Keen, Paul Ormerod, and Alan Kirman have shown more interest, but also criticized some trends in econophysics. In contrast, econophysics is having some impact on the more applied field of quantitative finance, whose scope and aims significantly differ from those of economic theory. Various econophysicists have introduced models for price fluctuations in financial markets or original points of view on established models. Also several scaling laws have been found in various economic data. Presently, one of the main results of econophysics comprises the explanation of the "fat tails" in the distribution of many kinds of financial data as a universal self-similar scaling property (i.e. scale invariant over many orders of magnitude in the data), arising from the tendency of individual market competitors, or of aggregates of them, to exploit systematically and optimally the prevailing "microtrends" (e.g., rising or falling prices). These "fat tails" are not only mathematically important, because they comprise the risks, which may be on the one hand, very small such that one may tend to neglect them, but which - on the other hand - are not negligible at all, i.e. they can never be made exponentially tiny, but instead follow a measurable algebraically decreasing power law, for example with a "failure probability" of only formula_1 where "x" is an increasingly large variable in the tail region of the distribution considered (i.e | https://en.wikipedia.org/wiki?curid=664332 |
Econophysics a price statistics with much more than 10 data). I.e., the events considered are not simply "outliers" but must really be taken into account and cannot be "insured away". It appears that it also plays a role that near a change of the tendency (e.g. from falling to rising prices) there are typical "panic reactions" of the selling or buying agents with algebraically increasing bargain rapidities and volumes. The "fat tails" are also observed in commodity markets. As in quantum field theory the "fat tails" can be obtained by complicated "nonperturbative" methods, mainly by numerical ones, since they contain the deviations from the usual Gaussian approximations, e.g. the Black–Scholes theory. Fat tails can, however, also be due to other phenomena, such as a random number of terms in the central-limit theorem, or any number of other, non-econophysics models. Due to the difficulty in testing such models, they have received less attention in traditional economic analysis. | https://en.wikipedia.org/wiki?curid=664332 |
Symmetrical inflation target A symmetrical inflation target is a requirement placed on a central bank to respond when inflation is too low as well as when inflation is too high. For example, the Bank of England and the Bank of Canada have symmetrical inflation targets. In contrast, the European Central Bank has a non-symmetrical inflation target—it is compelled to take action only when inflation is too high. | https://en.wikipedia.org/wiki?curid=665275 |
Eonia (Euro Overnight Index Average) is computed as a weighted average of all overnight unsecured lending transactions in the interbank market, undertaken in the European Union and European Free Trade Association (EFTA) countries by the Panel Banks. It is reported on an ACT/360 day count convention and is displayed to three decimal places. "Overnight" means from one TARGET day (i.e. day on which the Trans-European Automated Real-time Gross Settlement Express Transfer system is open) to the next. The panel of reporting banks is the same as for Euribor, and a list is provided by the overseers of the publication of the index. There is no clear definition of 'interbank market' leading to the potential of subjective assessment of what is an 'interbank loan', albeit all panel banks are subject to the Code of Conduct. "reference rates" are calculated by the European Central Bank, based on all overnight interbank assets created before the close of RTGS systems at 6pm CET, and published through GRSS (Global Rate Set Systems) every day before 7pm CET. It can be found under the ISIN identifier EU0009659945. Going forward, eonia will gradually be replaced by the Euro short-term rate (€STR). The ECB has published €STR from 2nd of October 2019. | https://en.wikipedia.org/wiki?curid=667117 |
Eco-capitalism Eco-capitalism, also known as environmental capitalism or (sometimes) green capitalism, is the view that capital exists in nature as "natural capital" (ecosystems that have ecological yield) on which all wealth depends. Therefore, governments should use market-based policy-instruments (such as a carbon tax) to resolve environmental problems. The term "Blue Greens" is often applied to those who espouse eco-capitalism. is considered as the right-wing equivalent to Red Greens. The roots of eco-capitalism can be traced back to the late 1960s. The "Tragedy of the Commons", an essay published in 1968 in "Science" by Garrett Hardin, claimed the inevitability of malthusian catastrophe due to liberal or democratic government's policies to leave family size matters to the family, and enabling the welfare state to willingly care for potential human overpopulation. Hardin argued that if families were given freedom of choice in the matter, but were removed from a welfare state, parents choosing to overbear would not have the resources to provide for their "litter", thus solving the problem of overpopulation. This represents an early argument made from an eco-capitalist standpoint: overpopulation would technically be solved by a free market. John Baden, a collaborator with Garrett Hardin on other works including "Managing the Commons," founded the Political Economy Research Center (now called the Property and Environment Research Center) in 1982 | https://en.wikipedia.org/wiki?curid=673858 |
Eco-capitalism As one of the first eco-capitalist organizations created, PERC's ongoing mission is "improving environmental quality through property rights and markets". The most popular eco-capitalist idea was emissions trading, or more commonly, cap and trade. Emissions trading, a market-based approach that allows polluting entities to purchase or be allocated permits, began being researched in the late 1960s. International emissions trading was significantly popularized in the 1990s when the United Nations adopted the Kyoto Protocol in 1997. The ideology of eco-capitalism was adopted to satisfy two competing needs: Under the doctrine of eco-capitalism, businesses commodify the act of addressing environmental issues. The following are common principles in the transition to eco-capitalism. A central part of eco-capitalism is to correct for the market failure seen in the externalization of pollution. By treating the issue of pollution as an externality it has allowed the market to minimize the degree of accountability. To correct for this market failure eco-capitalism would have to internalize this cost. A prime example of this shift towards internalizing externalities is seen in the adoption of a system for carbon trading. In a system like this people are forced to factor the pollution cost into their expenses. This system as well as other systems of internalization function on large and small scales (oftentimes both are tightly connected) | https://en.wikipedia.org/wiki?curid=673858 |
Eco-capitalism On a corporate scale, the government can regulate carbon emissions and other polluting factors in business practices forcing companies to either reduce their pollution levels, externalize these costs onto their consumers by raising the cost of their goods/services, and/or a combination of the two. These kinds of systems can also be effective in indirectly creating a more environmentally conscious consumer base. As the companies who are creating the most pollution face falling profit levels and rising prices their consumers and investors are inclined to take their business elsewhere. This migration of investment and revenue would then be expected to make its way to business who have already incorporated the minimization of pollution into their business model thus allowing them to provide lower prices and higher profit margins attracting the migrating consumers and investors. At the conception of the ideology, major theorists of eco-capitalism, Paul Hawken, Lester Brown, and Francis Cairncross, saw an opportunity to establish a different approach to environmentalism in a capitalist society. These theorists thought that not only producers but also consumers could shoulder the social responsibility of environmental restoration if "green technology, green taxes, green labeling, and eco-conscious shopping" existed. The resulting "shopping our way to sustainability" mentality encouraged the development of organic farming, renewable energy, green certifications as well as other eco-friendly practices | https://en.wikipedia.org/wiki?curid=673858 |
Eco-capitalism A 2015 report from Nielsen lends credence to this theory. According to the report, consumers have more brand loyalty and are willing to pay higher prices for a product that is perceived as being sustainable. This is especially true among Millennials and Generation Z. These generations currently make up 48% of the global marketplace and still haven't hit their peak spending levels. As these generations' preferences continue to shape how businesses operate and market themselves, they could drive a continued shift toward green consumption. According to the Annual Review of Environmental Resources, "the focus of policy makers, businesses, and researchers has mostly been on the latter (consuming differently), with relatively little attention paid to consuming less". A review of how to encourage sustainable consumption from the University of Surrey shows that, "Government policies send important signals to consumers about institutional goals and national priorities." Governments can pull a variety of levers to signal this including product, trading, building, media, and marketing standards. Creating perhaps the first major eco-capitalist endorsement, many political and economic institutions support a system of pollution credits. Such a system, which assigns property rights to emissions, is considered to be the most "efficient and effective" way for regulating greenhouse gas emissions in the current neoliberal global economy | https://en.wikipedia.org/wiki?curid=673858 |
Eco-capitalism Especially in the case of tradable pollution credits, the resulting market-based system of emissions regulation is believed to motivate businesses to invest in technology that reduce greenhouse gas emissions using positive reinforcement (i.e. ability to trade unused credits) and punishment (i.e. the need to buy more credits). Environmental full-cost accounting explains corporate actions on the basis of the triple bottom line, which is best summarized as "people, planet, and profit". As a concept of corporate social responsibility, full cost accounting not only considers social and economic costs and benefits but also the environmental implications of specific corporate actions. While there has been progress in measuring the cost of harm to the health of individuals and the environment, the interaction of environmental, social, and health effects makes measurement difficult. Measurement attempts can be broadly categorized as either behavioral in nature, like hedonic pricing, or dose-response which looks at indirect effects. A standardized measurement of these costs has yet to emerge. This should not be confused with the full-cost method used by organizations searching for oil and gas that "does not differentiate between operating expenses associated with successful and unsuccessful exploration projects". The current standard of using the gross domestic product (GDP) as an indicator of welfare is criticized for being inaccurate | https://en.wikipedia.org/wiki?curid=673858 |
Eco-capitalism An alternative to GDP, the genuine progress indicator compensates for the shortcomings of the GDP as a welfare indicator by accounting for environmental harms as well as other factors that affect consumption, such as crime and income inequality. Majority of the criticism from traditionally unregulated capitalism is due to eco-capitalism's increased regulation. Pollution credits (as a means for regulating greenhouse gas emissions) is traditionally at odds with economically conservative ideologies. Elements of unregulated capitalism prefer environmental issues to be addressed by individuals who may allocate their own income and wealth, oppose the commodification of by-products like carbon emissions, and emphasize positive incentives to maintain resources through free-market competition and entrepreneurship. Proponents of eco-capitalism view environmental reform like pollution credits as a more transformative and progressive system. According to these Proponents, since free market capitalism as inherently expansionist in tendency, ignoring environmental responsibility is a danger to the environment. Approximately 36% of Americans are deeply concerned about climate issues. Proponents of Eco Capitalism typically favor political environmentalism, which emphasizes negative incentives like regulation and taxes to encourage the conservation of resources and prevent environmental harm | https://en.wikipedia.org/wiki?curid=673858 |
Eco-capitalism Political theorist, Antonio Gramsci, cites theories of common sense, which suggests that, in general, free market capitalism absent of environmental reform, is ingrained in the minds of its members as the only viable and successful form of economic organization through cultural hegemony. Therefore, the proposal of any alternate economic system, like eco-capitalism, must overcome the predominant common sense and economic status quo in order to develop opposing theories. Nonetheless, movements in the United States and abroad have continued to push for reforms to protect the environment in current capitalistic systems. Another political theorist, Daniel Tanuro, explains, in his book "Green Capitalism: Why it Can't Work", that for green capitalism to be successful, it would have to replace current mainstream capitalism with Eco-socialist methods, while defying corporate interests: However, Tanuro adds that social and economical change to the current capitalist systems is necessary, because technology will invariably increase emissions as manufacturing processes and distribution systems progress. Tanuro argues for changes in three areas: Despite this argument, critics still claim that green consumption, sustainable behavior on the part of the consumer, is not enough to be instituted as a socio-environmental solution. In accordance with hegemony, capitalism agrees that the government has little control over market and buyers, sellers, and consumers ultimately drive the market | https://en.wikipedia.org/wiki?curid=673858 |
Eco-capitalism In contrast, in green capitalism, the government would have more control therefore; consumers do not have direct power over the market, and should not be held accountable. Thus, going against the established monetary system of capitalism in the U.S. and spread throughout the globally. Environmental Scholar Bill McKibben proposes "full scale climate mobilization" to address environmental decay. During World War II, vehicle manufacturers and general goods manufacturers shifted to producing weapons, military vehicles and war time goods. McKibben argues that, to combat environmental change, the American Military Industrial Complex and other national arms producers could shift to producing solar panels, wind turbines and other environmental products in an Eco-Capitalist system. Scholar Elliot Sperber counters McKibben's argument, citing that industrial environmental mobilization favoring eco-capitalism would exacerbate socioeconomic stratification. Sperber counters the notion that "full scale climate mobilization" and the production it implies is the best immediate solution for addressing climate change. Because Eco Capitalism is still capitalistic, it relies on production of goods. Sperber argues for the production of fewer goods (i.e. fewer plastics, fewer vehicles) to minimize carbon footprints. Apparent criticisms have risen concerns and need for social and economical transformation on both ends of the political and theoretical divide | https://en.wikipedia.org/wiki?curid=673858 |
Eco-capitalism Nonetheless, they have shaped the way the majority public has viewed and contributed to capitalism and continue to both actively change the innate structure of the economic system and enhance it for further economic stability. Tom Randall, a correspondent specializing in renewable energy for Bloomberg, calls to attention that wind and solar (energy sources) are "outperforming" fossil fuels. In terms of investments, clean energy outperforms both gas and coal by a 2-1 margin. This positive margin may be attributed to the consistently falling price of renewable energy production. Renewable energy sources hold assertive advantages over fossil fuels because they exist as technologies, not fuels. As time proceeds, renewable energy becomes inevitably more efficient as technology adapts. Technologies for extracting fuels may change, but the fuels remain as constants. Both the solar and wind industries have proven growth over time: Over the last 15 years, the solar industry has doubled seven times and the wind industry has doubled four times. In contrast, the fossil fuel industry has declined over the last 15 years. America's coal industry has lost 75 percent of its value within the past few years. Renewable energy sources also gain advantages over the fossil fuel industry through international governmental support. Globally, governments implement subsidies to boost the renewable energy industry. Concurrently, various global efforts fight against fossil fuel production and use | https://en.wikipedia.org/wiki?curid=673858 |
Eco-capitalism The demand for renewable energy sources has skyrocketed in the last 15 years, while fossil fuels have drastically fallen in demand (in capitalist societies). The worldwide concern of climate change (also known as global warming) is notably the largest contributor to the green energy industry's rapid acceleration, just as it is largely responsible for the decline of the fossil fuel industry. The overwhelming scientific consensus of climate change's reality and its potential catastrophic effects have caused a large part of the world's population to respond with panic and immediate action. While the world's response has been strong, environmentalists and climate scientists do not believe the response has been strong enough to counter climate change's effects, and that the transition from fossil fuels to renewable energy sources is moving far too slowly. The global efforts and concerns of both governments and individuals to take action regarding implementing and transforming a society's energy sources from fossil fuels to renewable energy sources show the enormous potential of the green energy market. This potential is seen in the countless renewable energy projects under way. Currently, there are over 4,000 major solar projects being implemented. These, and all renewable energy projects, set goals of long-term economic benefit. The Global Apollo Programme, set up by both economists and scientists, has a goal of creating a solar capability that can stand as a cheaper alternative to coal-fueled power plants by 2025 | https://en.wikipedia.org/wiki?curid=673858 |
Eco-capitalism In capitalist markets, solar energy has the very real potential of becoming a direct competitor to coal plants in less than a decade. While there can be many barriers to the transition to an eco-capitalist system, one of the most daunting and forgotten is the systemic barrier that can be created by former models. Dimitri Zenghelis explores the idea of path dependence and the how continuing to build infrastructure without foresight seriously impedes the implementation and benefits of future innovations. Zenghelis uses the term "locked-in" to describe situations where the full implementation of a new innovation cannot be seen because an earlier infrastructure prevents it from functioning well. This barrier is exemplified in older cities like Los Angeles, San Francisco and New York where the infrastructure was designed around urban sprawl to accommodate private vehicles. The sprawl has been researched with the results returning that the moving forward mega-cities need to be constructed as eco-cities if the hope of curving emission levels down is going to have any hope. | https://en.wikipedia.org/wiki?curid=673858 |
Prime rate A prime rate or prime lending rate is an interest rate used by banks, usually the interest rate at which banks lend to customers with good credit. Some variable interest rates may be expressed as a percentage above or below prime rate. Historically, in North American banking, the prime rate was the actual interest rate, although this is no longer the case. The prime rate varies little among banks and adjustments are generally made by banks at the same time, although this does not happen frequently. The current prime rate is 3.25% in the United States, while it is 2.45% in Canada. In the United States, the prime rate runs approximately 300 basis points (or 3 percentage points) above the federal funds rate, which is the interest rate that banks charge each other for overnight loans made to fulfill reserve funding requirements. The Federal funds rate plus a much smaller increment is frequently used for lending to the most creditworthy borrowers, as is LIBOR, the London Interbank Offered Rate. The Federal Open Market Committee (FOMC) meets eight times per year to set a target for the federal funds rate. Prior to December 17, 2008, the "Wall Street Journal" followed a policy of changing its published prime rate when 23 out of 30 of the United States' largest banks changed their prime rates. Recognizing that fewer, larger banks now control most banking assets—i.e., it is more concentrated—the "Journal" now publishes a rate reflecting the base rate posted by at least 70% of the top ten banks by assets | https://en.wikipedia.org/wiki?curid=680340 |
Prime rate Effective January 2, 2015, the Base Lending Rate (BLR) structure was replaced with a new Base Rate (BR) system. Under BR, which will now serve as the main reference rate for new retail floating rate loans, banks in Malaysia can determine their interest rate based on a formula set by Bank Negara, the Malaysian central bank. Malayan Banking Bhd (Maybank) has set a group-wide base rate at 3.2%, effective Jan 2, 2015. All new retail loans and financing such as mortgages, unit trust loans, share margin financing, personal financing and overdraft facilities which are applied for by individual customers will be based on the base rate. Though certain banks may be setting a higher BR compared to others, they can sometimes offer lower ELR to customers in order to remain competitive. Loans that are already approved and extended prior to January 2, 2015 will still follow the old BLR until the end of the loan tenure. The prime rate is used often as an index in calculating rate changes to adjustable-rate mortgages (ARM) and other variable rate short-term loans. It is used in the calculation of some private student loans. Many credit cards and home equity lines of credit with variable interest rates have their rate specified as the prime rate (index) plus a fixed value commonly called the spread or margin. | https://en.wikipedia.org/wiki?curid=680340 |
Wall Street Journal prime rate The Wall Street Journal Prime Rate (WSJ Prime Rate) is a measure of the U.S. prime rate, defined by The Wall Street Journal (WSJ) as "the base rate on corporate loans posted by at least 70% of the 10 largest U.S. banks". It is not the "best" rate offered by banks. It should not be confused with the federal funds rate set by the Federal Reserve, though these two rates often move in tandem. The print edition of the WSJ is generally the official source of the prime rate. The is considered a trailing economic indicator. Many (if not most) lenders specify this as their source of this index and set their prime rates according to the rates published in the Wall Street Journal. Because most consumer interest rates are based upon the Wall Street Journal Prime Rate, when this rate changes, most consumers can expect to see the interest rates of credit cards, auto loans and other consumer debt change. The prime rate does not change at regular intervals. It changes only when the nation's "largest banks" decide on the need to raise, or lower, their "base rate". The prime rate may not change for years, but it has also changed several times in a single year. | https://en.wikipedia.org/wiki?curid=680980 |
Space elevator economics compares the cost of sending a payload into Earth orbit via a space elevator with the cost of doing so with alternatives, like rockets. The costs of using a well-tested system to launch payloads are high. Prices range from about $2,350/kg for a Falcon Heavy launch to about US$40,000/kg for a Pegasus launch (2004). Various systems that have been proposed have offered lower rates, but have failed to get sufficient funding (Roton; Sea Dragon), are still under development like New Glenn or the SpaceX Starship (which promises prices as low as $47/kg and first flight in the 2020s), or more commonly, have financially underperformed (as in the case of the Space Shuttle). The Shtil-3a rocket offers costs approximately $400/kg, but launches are infrequent and have a comparatively small payload, and its costs are partially subsidized by the Russian navy as part of launch exercises. Rocket costs have changed relatively little since the 1960s, but the market has been very flat. For a space elevator, the cost varies according to the design. Bradley C. Edwards received funding from NIAC from 2001 to 2003 to write a paper, describing a space elevator design. In it he stated that: "The first space elevator would reduce lift costs immediately to $100 per pound" ($220/kg). The gravitational potential energy of any object in geosynchronous orbit (GEO), relative to Earth's surface, is about 50 MJ (15 kWh) of energy per kilogram (see geosynchronous orbit for details) | https://en.wikipedia.org/wiki?curid=683436 |
Space elevator economics Using wholesale electricity prices for 2008 to 2009, and the current 0.5% efficiency of power beaming, a space elevator would require US$220/kg just in electrical costs. Dr. Edwards expects technical advances to increase the efficiency to 2%. However, due to the fact that space elevators would have a limited throughput as only a few payloads could climb the tether at any one time, the launch price may be subject to market forces. According to a paper presented at the 55th International Astronautical Congress in Vancouver in October 2004, the space elevator can be considered a prestige megaproject whose current estimated cost (US$6.2 billion) is favourable compared to other megaprojects e.g. bridges, pipelines, tunnels, tall towers, high-speed rail links and maglevs. Costs are also favourable compared to that of other aerospace systems and launch vehicles. A space elevator built according to the Edwards proposal is estimated to cost $6 billion. For comparison, in potentially the same time frame as the elevator, the Skylon, a 12,000 kg cargo capacity single-stage-to-orbit spaceplane (not a conventional rocket) is estimated to have an R&D and production cost of about $15 billion. The vehicle has about $3,000/kg price tag. Skylon would be suitable to launch cargo "and particularly" people to low/medium Earth orbit (targeting maximum 30 people per flight). Early space elevator designs move only cargo but could move people as well to a much wider range of destinations | https://en.wikipedia.org/wiki?curid=683436 |
Space elevator economics Another alternative project to get large numbers of people and cargo to orbit inexpensively during this time frame is the SpaceX Starship which, like Skylon, is not a conventional rocket design as it will be fully reusable. Its cargo capacity will be between , is estimated to have an R&D cost of $10 billion, and production cost of about $200-million for Starship crew, $130-million for Starship tanker and $230-million for Super Heavy. The system has a less than $140/kg price tag which is possibly as low as $47/kg. It will be capable of transporting 100 people comfortably to Mars (therefore significantly more to low/medium earth orbit) | https://en.wikipedia.org/wiki?curid=683436 |
Accelerator effect The accelerator effect in economics is a positive effect on private fixed investment of the growth of the market economy (measured e.g. by a change in Gross Domestic Product). Rising GDP (an economic boom or prosperity) implies that businesses in general see rising profits, increased sales and cash flow, and greater use of existing capacity. This usually implies that profit expectations and business confidence rise, encouraging businesses to build more factories and other buildings and to install more machinery. (This expenditure is called "fixed investment".) This may lead to further growth of the economy through the stimulation of consumer incomes and purchases, i.e., via the multiplier effect. The accelerator effect also goes the other way: falling GDP (a recession) hurts business profits, sales, cash flow, use of capacity and expectations. This in turn discourages fixed investment, worsening a recession by the multiplier effect. The accelerator effect fits the behavior of an economy best when either the economy is moving away from full employment or when it is already below that level of production. This is because high levels of aggregate demand hit against the limits set by the existing labour force, the existing stock of capital goods, the availability of natural resources, and the technical ability of an economy to convert inputs into products. The acceleration effect is the phenomenon that a variable moves toward its desired value faster and faster with respect to time | https://en.wikipedia.org/wiki?curid=683628 |
Accelerator effect Usually, the variable is the capital stock. In Keynesian models, fixed capital is not in consideration, so the accelerator coefficient becomes the reciprocal of the multiplier and the capital decision degenerates to investment decision. In more general theory, where the capital decision determines the desired level of capital stock (which includes fixed capital and working capital), and the investment decision determines the change of capital stock in a sequences of periods, the acceleration effect emerges as only the current period gap affects the current investment, so do the previous gaps. The Aftalion-Clark accelerator v has such a form formula_1, while the Keynesian multiplier m has such a form formula_2 where "MPC" is the marginal propensity to consume.The idea of the accelerator has been very well explained by Hayek. As the acceleration effect dictates that the increase of income accelerates capital accumulation, and the decrease of income accelerates capital depletion (in a simple model), this might cause the system to become unstable or cyclical, and hence many kinds of business cycle models are of this kind (the multiplier-accelerator cycle models). The accelerator effect is shown in the simple accelerator model. This model assumes that the stock of capital goods (K) is proportional to the level of production ("Y"): This implies that if "k" (the capital-output ratio) is constant, an increase in "Y" requires an increase in "K" | https://en.wikipedia.org/wiki?curid=683628 |
Accelerator effect That is, net investment, "I" equals: Suppose that "k" = 2 (usually, k is assumed to be in (0,1)). This equation implies that if "Y" rises by 10, then net investment will equal 10×2 = 20, as suggested by the accelerator effect. If "Y" then rises by only 5, the equation implies that the level of investment will be 5×2 = 10. This means that the simple accelerator model implies that fixed investment will "fall" if the growth of production "slows". "An actual fall in production is not needed to cause investment to fall." However, such a fall in output will result if slowing growth of production causes investment to fall, since that reduces aggregate demand. Thus, the simple accelerator model implies an endogenous explanation of the business-cycle downturn, the transition to a recession. Modern economists have described the accelerator effect in terms of the more sophisticated flexible accelerator model of investment. Businesses are described as engaging in net investment in fixed capital goods in order to close the gap between the "desired" stock of capital goods ("K") and the "existing" stock of capital goods left over from the past ("K"): where "x" is a coefficient representing the speed of adjustment (1 ≥ "x" ≥ 0). The desired stock of capital goods is determined by such variables as the expected profit rate, the expected level of output, the interest rate (the cost of finance), and technology | https://en.wikipedia.org/wiki?curid=683628 |
Accelerator effect Because the expected level of output plays a role, this model exhibits behavior described by the accelerator effect but less extreme than that of the simple accelerator. Because the existing capital stock grows over time due to past net investment, a "slowing" of the growth of output (GDP) can cause the gap between the desired "K" and the existing "K" to narrow, close, or even become negative, causing current net investment to fall. Obviously, ceteris paribus, an actual fall in output depresses the desired stock of capital goods and thus net investment. Similarly, a rise in output causes a rise in investment. Finally, if the desired capital stock is less than the actual stock, then net investment may be depressed for a long time. In the neoclassical accelerator model of Jorgenson, the desired capital stock is derived from the aggregate production function assuming profit maximization and perfect competition. In Jorgenson's original model (1963), there is no acceleration effect, since the investment is instantaneous, so the capital stock can jump. | https://en.wikipedia.org/wiki?curid=683628 |
Net investment In economics, net investment is spending which increases the availability of fixed capital goods or means of production and goods inventories. It is the total spending on newly produced physical capital (fixed investment) and on inventories (inventory investment)—that is, gross investment—minus replacement investment, which simply replaces depreciated capital goods. It is productive capital formation plus net additions to the stock of housing and the stock of inventories. | https://en.wikipedia.org/wiki?curid=683683 |
Austerity is a set of political-economic policies that aim to reduce government budget deficits through spending cuts, tax increases, or a combination of both. measures are used by governments that find it difficult to pay their debts. The measures are meant to reduce the budget deficit by bringing government revenues closer to expenditures, which is assumed to make the payment of debt easier. measures also demonstrate a government's fiscal discipline to creditors and credit rating agencies. In most macroeconomic models, austerity policies generally increase unemployment as government spending falls. Cutbacks in government spending reduce employment in the public and may also do so in the private sector. Additionally, tax increases can reduce consumption by cutting household disposable income. Some claim that reducing spending may result in a higher debt-to-GDP ratio because government expenditure itself is a component of GDP. In the aftermath of the Great Recession, for instance, austerity measures in many European countries were followed by rising unemployment and debt-to-GDP ratios despite reductions in budget deficits. When an economy is operating at or near capacity, higher short-term deficit spending (stimulus) can cause interest rates to rise, resulting in a reduction in private investment, which in turn reduces economic growth. Where there is excess capacity, the stimulus can result in an increase in employment and output | https://en.wikipedia.org/wiki?curid=684037 |
Austerity measures are typically pursued if there is a threat that a government cannot honour its debt obligations. This may occur when a government has borrowed in foreign currencies (that it has no right to issue), or if it has been legally forbidden from issuing its own currency. Alberto Alesina, Carlo Favero, and Francesco Giavazzi argue that austerity can be expansionary in situations where government reduction in spending is offset by greater increases in aggregate demand (private consumption, private investment and exports). In such a situation, banks and investors may lose confidence in a government's ability or willingness to pay, and either refuse to roll over existing debts, or demand extremely high interest rates. International financial institutions such as the International Monetary Fund (IMF) may demand austerity measures as part of Structural Adjustment Programmes when acting as lender of last resort. policies may also appeal to the wealthier class of creditors, who prefer low inflation and the higher probability of payback on their government securities by less profligate governments. More recently austerity has been pursued after governments became highly indebted by assuming private debts following banking crises. (This occurred after Ireland assumed the debts of its private banking sector during the European debt crisis. This rescue of the private sector resulted in calls to cut back the profligacy of the public sector | https://en.wikipedia.org/wiki?curid=684037 |
Austerity ) According to Mark Blyth, the concept of austerity emerged in the 20th century, when large states acquired sizable budgets. However, Blyth argues that the theories and sensibilities about the role of the state and capitalist markets that underline austerity emerged from the 17th century onwards. is grounded in liberal economics' view of the state and sovereign debt as deeply problematic. Blyth traces the discourse of austerity back to John Locke's theory of private property and derivative theory of the state, David Hume's ideas about money and the virtue of merchants, and Adam Smith's theories on economic growth and taxes. On the basis of classic liberal ideas, austerity emerged as a doctrine of neoliberalism in the 20th century. Economist David M. Kotz suggests that the implementation of austerity measures following the financial crisis of 2007–2008 was an attempt to preserve the neoliberal capitalist model. In the 1930s during the Great Depression, anti-austerity arguments gained more prominence. John Maynard Keynes became a well known anti-austerity economist, arguing that "The boom, not the slump, is the right time for austerity at the Treasury." Contemporary Keynesian economists argue that budget deficits are appropriate when an economy is in recession, to reduce unemployment and help spur GDP growth. According to Paul Krugman, since a government is not like a household, reductions in government spending during economic downturns worsen the crisis | https://en.wikipedia.org/wiki?curid=684037 |
Austerity Across an economy, one person's spending is another person's income. In other words, if everyone is trying to reduce their spending, the economy can be trapped in what economists call the paradox of thrift, worsening the recession as GDP falls. In the past this has been offset by encouraging consumerism to rely on debt, but after the 2008 crisis, this is looking like a less and less viable option for sustainable economics. Krugman argues that, if the private sector is unable or unwilling to consume at a level that increases GDP and employment sufficiently, then the government should be spending more in order to offset the decline in private spending. Keynesian theory is proposed as being responsible for post-war boom years, before the 1970s, and when public sector investment was at its highest across Europe, partially encouraged by the Marshall Plan. An important component of economic output is business investment, but there is no reason to expect it to stabilize at full utilization of the economy's resources. High business profits do not necessarily lead to increased economic growth. (When businesses and banks have a disincentive to spend accumulated capital, such as cash repatriation taxes from profits in overseas tax havens and interest on excess reserves paid to banks, increased profits can lead to decreasing growth | https://en.wikipedia.org/wiki?curid=684037 |
Austerity ) Economists Kenneth Rogoff and Carmen Reinhart wrote in April 2013, ""seldom works without structural reforms – for example, changes in taxes, regulations and labor market policies – and if poorly designed, can disproportionately hit the poor and middle class. Our consistent advice has been to avoid withdrawing fiscal stimulus too quickly, a position identical to that of most mainstream economists."" To help improve the U.S. economy, they (Rogoff and Reinhart) advocated reductions in mortgage principal for 'underwater homes'—those whose negative equity (where the value of the asset is less than the mortgage principal) can lead to a stagnant housing market with no realistic opportunity to reduce private debts). In October 2012, the IMF announced that its forecasts for countries that implemented austerity programs have been consistently overoptimistic, suggesting that tax hikes and spending cuts have been doing more damage than expected and that countries that implemented fiscal stimulus, such as Germany and Austria, did better than expected. The IMF reported that this was due to fiscal multipliers that were considerably larger than expected: for example, the IMF estimated that fiscal multipliers based on data from 28 countries ranged between 0.9 and 1.7. In other words, a 1% GDP fiscal consolidation (i.e., austerity) would reduce GDP between 0.9% and 1.7%, thus inflicting far more economic damage than the 0.5 previously estimated in IMF forecasts | https://en.wikipedia.org/wiki?curid=684037 |
Austerity In many countries, little is known about the size of multipliers, as data availability limits the scope for empirical research. For these countries, Nicoletta Batini, Luc Eyraud and Anke Weber propose a simple method—dubbed the "bucket approach"—to come up with reasonable multiplier estimates. The approach bunches countries into groups (or "buckets") with similar multiplier values, based on their characteristics, and taking into account the effect of (some) temporary factors such as the state of the business cycle. Different tax and spending choices of equal magnitude have different economic effects: For example, the U.S. Congressional Budget Office estimated that the payroll tax (levied on all wage earners) has a higher multiplier (impact on GDP) than does the income tax (which is levied primarily on wealthier workers). In other words, raising the payroll tax by $1 as part of an austerity strategy would slow the economy more than would raising the income tax by $1, resulting in less net deficit reduction. In theory, it would stimulate the economy and reduce the deficit if the payroll tax were lowered and the income tax raised in equal amounts. The term "crowding out" refers to the extent to which an increase in the budget deficit offsets spending in the private sector. Economist Laura D'Andrea Tyson wrote in June 2012, "By itself an increase in the deficit, either in the form of an increase in government spending or a reduction in taxes, causes an increase in demand" | https://en.wikipedia.org/wiki?curid=684037 |
Austerity How this affects output, employment, and growth depends on what happens to interest rates: When the economy is operating near capacity, government borrowing to finance an increase in the deficit causes interest rates to rise and higher interest rates reduce or 'crowd out' private investment, reducing growth. This theory explains why large and sustained government deficits take a toll on growth: they reduce capital formation. But this argument rests on how government deficits affect interest rates, and the relationship between government deficits and interest rates varies. When there is considerable excess capacity, an increase in government borrowing to finance an increase in the deficit does not lead to higher interest rates and does not crowd out private investment. Instead, the higher demand resulting from the increase in the deficit bolsters employment and output directly. The resultant increase in income and economic activity in turn encourages, or 'crowds in', additional private spending. Some argue that the 'crowding-in' model is an appropriate solution for current economic conditions." According to economist Martin Wolf, the U.S. and many Eurozone countries experienced rapid increases in their budget deficits in the wake of the 2008 crisis as a result of significant private-sector retrenchment and ongoing capital account surpluses. Policy choices had little to do with these deficit increases. This makes austerity measures counterproductive | https://en.wikipedia.org/wiki?curid=684037 |
Austerity Wolf explained that government fiscal balance is one of three major financial sectoral balances in a country's economy, along with the foreign financial sector (capital account) and the private financial sector. By definition, the sum of the surpluses or deficits across these three sectors must be zero. In the U.S. and many Eurozone countries other than Germany, a foreign financial surplus exists because capital is imported (net) to fund the trade deficit. Further, there is a private-sector financial surplus because household savings exceed business investment. By definition, a government budget deficit must exist so all three net to zero: for example, the U.S. government budget deficit in 2011 was approximately 10% of GDP (8.6% of GDP of which was federal), offsetting a foreign financial surplus of 4% of GDP and a private-sector surplus of 6% of GDP. Wolf explained in July 2012 that the sudden shift in the private sector from deficit to surplus forced the U.S. government balance into deficit: ""The financial balance of the private sector shifted towards surplus by the almost unbelievable cumulative total of 11.2 per cent of gross domestic product between the third quarter of 2007 and the second quarter of 2009, which was when the financial deficit of US government (federal and state) reached its peak... No fiscal policy changes explain the collapse into massive fiscal deficit between 2007 and 2009, because there was none of any importance | https://en.wikipedia.org/wiki?curid=684037 |
Austerity The collapse is explained by the massive shift of the private sector from financial deficit into surplus or, in other words, from boom to bust."" Wolf also wrote that several European economies face the same scenario and that a lack of deficit spending would likely have resulted in a depression. He argued that a private-sector depression (represented by the private- and foreign-sector surpluses) was being "contained" by government deficit spending. Economist Paul Krugman also explained in December 2011 the causes of the sizable shift from private-sector deficit to surplus in the U.S.: "This huge move into surplus reflects the end of the housing bubble, a sharp rise in household saving, and a slump in business investment due to lack of customers." One reason why austerity can be counterproductive in a downturn is due to a significant private-sector financial surplus, in which consumer savings is not fully invested by businesses. In a healthy economy, private-sector savings placed into the banking system by consumers are borrowed and invested by companies. However, if consumers have increased their savings but companies are not investing the money, a surplus develops. Business investment is one of the major components of GDP. For example, a U.S. private-sector financial deficit from 2004 to 2008 transitioned to a large surplus of savings over investment that exceeded $1 trillion by early 2009, and remained above $800 billion into September 2012 | https://en.wikipedia.org/wiki?curid=684037 |
Austerity Part of this investment reduction was related to the housing market, a major component of investment. This surplus explains how even significant government deficit spending would not increase interest rates (because businesses still have access to ample savings if they choose to borrow and invest it, so interest rates are not bid upward) and how Federal Reserve action to increase the money supply does not result in inflation (because the economy is awash with savings with no place to go). Economist Richard Koo described similar effects for several of the developed world economies in December 2011: "Today private sectors in the U.S., the U.K., Spain, and Ireland (but not Greece) are undergoing massive deleveraging [paying down debt rather than spending] in spite of record low interest rates. This means these countries are all in serious balance sheet recessions. The private sectors in Japan and Germany are not borrowing, either. With borrowers disappearing and banks reluctant to lend, it is no wonder that, after nearly three years of record low interest rates and massive liquidity injections, industrial economies are still doing so poorly. Flow of funds data for the U.S. show a massive shift away from borrowing to savings by the private sector since the housing bubble burst in 2007. The shift for the private sector as a whole represents over 9 percent of U.S. GDP at a time of zero interest rates. Moreover, this increase in private sector savings exceeds the increase in government borrowings (5 | https://en.wikipedia.org/wiki?curid=684037 |
Austerity 8 percent of GDP), which suggests that the government is not doing enough to offset private sector deleveraging." Many scholars have argued that how the debate surrounding austerity is framed has a heavy impact on the view of austerity in the public eye, and how the public understands macroeconomics as a whole. Wren-Lewis, for example, coined the term 'mediamacro', which refers to "the role of the media reproducing particularly corrosive forms of economic illiteracy—of which the idea that deficits are ipso facto 'bad' is a strong example." This can go as far as ignoring economists altogether; however, it often manifests itself as a drive in which a minority of economists whose ideas about austerity have been thoroughly debunked being pushed to the front to justify public policy, such as in the case of Alberto Alesina (2009), whose pro-austerity works were "thoroughly debunked by the likes of the economists, the IMF, and the Centre for Budget and Policy Priorities (CBPP)." Other anti-austerity economists, such as Seymour have argued that the debate must be reframed as a social and class movement, and its impact judged accordingly, since statecraft is viewed as the main goal. Further, critics such as Major have highlighted how the OECD and associated international finance organisations have framed the debate to promote austerity, for example, the concept of 'wage-push inflation' which ignores the role played by the profiteering of private companies, and seeks to blame inflation on wages being too high | https://en.wikipedia.org/wiki?curid=684037 |
Austerity In layman's terms, if a loaf of bread costs £1 in 2014, and the minimum/average wage goes up also, the companies realise that they can get more selling that same loaf of bread for £1.20, creating inflation which devalues the currency; the OECD opted to view the wages as the cause, rather than the companies seeking to make a profit. This places an emphasis on the 'balance of finances', and ignores the role played by private interests which are completely avoidable, but is used to justify measures and the transfer of debt down to the working class, and ties in heavily to the discredited theory of 'trickle down economics.' Framing the debate in this way, and ignoring the balance between bonds, taxation, interest rates, and inflation which the government can manipulate and control, leads to false assertions and oversimplified economics which conflate a household budget with a national economy—an entirely false equivalency. According to a 2020 study, austerity increases the risk of default in situations of severe fiscal stress, but reduces the risk of default in situations of low fiscal stress. A typical goal of austerity is to reduce the annual budget deficit without sacrificing growth. Over time, this may reduce the overall debt burden, often measured as the ratio of public debt to GDP. During the European debt crisis, many countries embarked on austerity programs, reducing their budget deficits relative to GDP from 2010 to 2011. According to the "CIA World Factbook", Greece decreased its budget deficit from 10 | https://en.wikipedia.org/wiki?curid=684037 |
Austerity 4% of GDP in 2010 to 9.6% in 2011. Iceland, Italy, Ireland, Portugal, France, and Spain also decreased their budget deficits from 2010 to 2011 relative to GDP but the austerity policy of the Eurozone achieves not only the reduction of budget deficits. The goal of economic consolidation influences the future development of the European Social Model. With the exception of Germany, each of these countries had public-debt-to-GDP ratios that increased from 2010 to 2011, as indicated in the chart at right. Greece's public-debt-to-GDP ratio increased from 143% in 2010 to 165% in 2011 Indicating despite declining budget deficits GDP growth was not sufficient to support a decline in the debt-to-GDP ratio for these countries during this period. Eurostat reported that the overall debt-to-GDP ratio for the EA17 was 70.1% in 2008, 80.0% in 2009, 85.4% in 2010, 87.3% in 2011, and 90.6% in 2012. Further, real GDP in the EA17 declined for six straight quarters from Q4 2011 to Q1 2013. Unemployment is another variable considered in evaluating austerity measures. According to the "CIA World Factbook", from 2010 to 2011, the unemployment rates in Spain, Greece, Ireland, Portugal, and the UK increased. France and Italy had no significant changes, while in Germany and Iceland the unemployment rate declined. Eurostat reported that Eurozone unemployment reached record levels in March 2013 at 12.1%, up from 11.6% in September 2012 and 10.3% in 2011. Unemployment varied significantly by country | https://en.wikipedia.org/wiki?curid=684037 |
Austerity Economist Martin Wolf analyzed the relationship between cumulative GDP growth in 2008 to 2012 and total reduction in budget deficits due to austerity policies in several European countries during April 2012 (see chart at right). He concluded, ""In all, there is no evidence here that large fiscal contractions budget deficit reductions bring benefits to confidence and growth that offset the direct effects of the contractions. They bring exactly what one would expect: small contractions bring recessions and big contractions bring depressions."" Changes in budget balances (deficits or surpluses) explained approximately 53% of the change in GDP, according to the equation derived from the IMF data used in his analysis. Similarly, economist Paul Krugman analyzed the relationship between GDP and reduction in budget deficits for several European countries in April 2012 and concluded that austerity was slowing growth. He wrote: "this also implies that 1 euro of austerity yields only about 0.4 euros of reduced deficit, even in the short run. No wonder, then, that the whole austerity enterprise is spiraling into disaster." The Greek government-debt crisis brought a package of austerity measures, put forth by the EU and the IMF mostly in the context of the three successive bailouts the country endured from 2010 to 2018; it was met with great anger by the Greek public, leading to riots and social unrest | https://en.wikipedia.org/wiki?curid=684037 |
Austerity On 27 June 2011, trade union organizations began a 48-hour labour strike in advance of a parliamentary vote on the austerity package, the first such strike since 1974. Massive demonstrations were organized throughout Greece, intended to pressure members of parliament into voting against the package. The second set of austerity measures was approved on 29 June 2011, with 155 out of 300 members of parliament voting in favor. However, one United Nations official warned that the second package of austerity measures in Greece could pose a violation of human rights. Around 2011, the IMF started issuing guidance suggesting that austerity could be harmful when applied without regard to an economy's underlying fundamentals. In 2013, it published a detailed analysis concluding that "if financial markets focus on the short-term behavior of the debt ratio, or if country authorities engage in repeated rounds of tightening in an effort to get the debt ratio to converge to the official target," austerity policies could slow or reverse economic growth and inhibit full employment. Keynesian economists and commentators such as Paul Krugman have suggested that this has in fact been occurring, with austerity yielding worse results in proportion to the extent to which it has been imposed. Overall, Greece lost 25% of its GDP during the crisis | https://en.wikipedia.org/wiki?curid=684037 |
Austerity Although the government debt increased only 6% between 2009 and 2017 (from €300 bn to €318 bn) — thanks, in part, to the 2012 debt restructuring —, the critical debt-to-GDP ratio shot up from 127% to 179% mostly due to the severe GDP drop during the handling of the crisis. In all, the Greek economy suffered the longest recession of any advanced capitalist economy to date, overtaking the US Great Depression. As such, the crisis hit hardly the populace as the series of sudden reforms and austerity measures led to impoverishment and loss of income and property, as well as a small-scale humanitarian crisis. Unemployment shot up from 8% in 2008 to 27% in 2013 and remained at 22% in 2017. As a result of the crisis, Greek political system has been upended, social exclusion increased, and hundreds of thousands of well-educated Greeks left the country. In April and May 2012, France held a presidential election in which the winner, François Hollande, had opposed austerity measures, promising to eliminate France's budget deficit by 2017 by canceling recently enacted tax cuts and exemptions for the wealthy, raising the top tax bracket rate to 75% on incomes over one million euros, restoring the retirement age to 60 with a full pension for those who have worked 42 years, restoring 60,000 jobs recently cut from public education, regulating rent increases, and building additional public housing for the poor | https://en.wikipedia.org/wiki?curid=684037 |
Austerity In the legislative elections in June, Hollande's Socialist Party won a supermajority capable of amending the French Constitution and enabling the immediate enactment of the promised reforms. Interest rates on French government bonds fell by 30% to record lows, fewer than 50 basis points above German government bond rates. Latvia's economy returned to growth in 2011 and 2012, outpacing the 27 nations in the EU, while implementing significant austerity measures. Advocates of austerity argue that Latvia represents an empirical example of the benefits of austerity, while critics argue that austerity created unnecessary hardship with the output in 2013 still below the pre-crisis level. According to the CIA World Fact Book, "Latvia's economy experienced GDP growth of more than 10% per year during 2006–07, but entered a severe recession in 2008 as a result of an unsustainable current account deficit and large debt exposure amid the softening world economy. Triggered by the collapse of the second largest bank, GDP plunged 18% in 2009. The economy has not returned to pre-crisis levels despite strong growth, especially in the export sector in 2011–12. The IMF, EU, and other international donors provided substantial financial assistance to Latvia as part of an agreement to defend the currency's peg to the euro in exchange for the government's commitment to stringent austerity measures. The IMF/EU program successfully concluded in December 2011 | https://en.wikipedia.org/wiki?curid=684037 |
Austerity The government of Prime Minister Valdis Dombrovskis remained committed to fiscal prudence and reducing the fiscal deficit from 7.7% of GDP in 2010, to 2.7% of GDP in 2012." The CIA estimated that Latvia's GDP declined by 0.3% in 2010, then grew by 5.5% in 2011 and 4.5% in 2012. Unemployment was 12.8% in 2011 and rose to 14.3% in 2012. Latvia's currency, the Lati, fell from $0.47 per U.S. dollar in 2008 to $0.55 in 2012, a decline of 17%. Latvia entered the euro zone in 2014. Latvia's trade deficit improved from over 20% of GDP in 2006 to 2007 to under 2% GDP by 2012. Eighteen months after harsh austerity measures were enacted (including both spending cuts and tax increases), economic growth began to return, although unemployment remained above pre-crisis levels. Latvian exports have skyrocketed and both the trade deficit and budget deficit have decreased dramatically. More than one-third of government positions were eliminated, and the rest received sharp pay cuts. Exports increased after goods prices were reduced due to private business lowering wages in tandem with the government. Paul Krugman wrote in January 2013 that Latvia had yet to regain its pre-crisis level of employment. He also wrote, "So we're looking at a Depression-level slump, and 5 years later only a partial bounceback; unemployment is down but still very high, and the decline has a lot to do with emigration | https://en.wikipedia.org/wiki?curid=684037 |
Austerity It's not what you'd call a triumphant success story, any more than the partial US recovery from 1933 to 1936—which was actually considerably more impressive—represented a huge victory over the Depression. And it's in no sense a refutation of Keynesianism, either. Even in Keynesian models, a small open economy can, in the long run, restore full employment through deflation and internal devaluation; the point, however, is that it involves many years of suffering". Latvian Prime Minister Valdis Dombrovskis defended his policies in a television interview, stating that Krugman refused to admit his error in predicting that Latvia's austerity policy would fail. Krugman had written a blog post in December 2008 entitled "Why Latvia is the New Argentina", in which he argued for Latvia to devalue its currency as an alternative or in addition to austerity. Following the financial crisis of 2007–2008 a period of economic recession began in the UK. The austerity programme was initiated in 2010 by the Conservative and Liberal Democrat coalition government, despite widespread opposition from the academic community. In his June 2010 budget speech, the Chancellor George Osborne identified two goals. The first was that the structural current budget deficit would be eliminated to "achieve cyclically-adjusted current balance by the end of the rolling, five-year forecast period". The second was that national debt as a percentage of GDP would be falling | https://en.wikipedia.org/wiki?curid=684037 |
Austerity The government intended to achieve both of its goals through substantial reductions in public expenditure. This was to be achieved by a combination of public spending reductions and tax increases. Economists Alberto Alesina, Carlo A. Favero and Francesco Giavazzi, writing in "Finance & Development" in 2018, argued that deficit reduction policies based on spending cuts typically have almost no effect on output, and hence form a better route to achieving a reduction in the debt-to-GDP ratio than raising taxes. The authors commented that the UK government austerity programme had resulted in growth that was higher than the European average and that the UK's economic performance had been much stronger than the International Monetary Fund had predicted. This claim was challenged most strongly by Mark Blyth, whose 2014 book on austerity claims that austerity not only fails to stimulate growth, but effectively passes that debt down to the working classes. As such, many academics such as Andrew Gamble view in Britain less as an economic necessity, and more as a tool of statecraft, driven by ideology and not economic requirements. A study published in "The BMJ" in November 2017 found the Conservative government austerity programme had been linked to approximately 120,000 deaths since 2010; however, this was disputed, for example on the grounds that it was an observational study which did not show cause and effect | https://en.wikipedia.org/wiki?curid=684037 |
Austerity More studies claim adverse effects of austerity on population health, which include an increase in the mortality rate among pensioners which has been linked to unprecedented reductions in income support, an increase in suicides and the prescription of antidepressants for patients with mental health issues, and an increase in violence, self-harm, and suicide in prisons. The United States' response to the 2008 economic crash was largely influenced by Wall Street and IMF interests, who favored fiscal retrenchment in the face of the economic crash. Evidence exists to suggest that Pete Peterson (and the Petersonites) have heavily influenced US policy on economic recovery since the Nixon era, and presented itself in 2008, despite Measures being "wildly out of step with public opinion and reputable economic policy...[and showing] anti-Keynesian bias of supply side economics and a political system skewed to favor Wall Street over Main Street". The nuance of the economic logic of Keynesianism is, however, difficult to put across to the American Public, and compares poorly to the simplistic message which blames government spending, which might explain Obama's preferred position of a halfway point between economic stimulus followed by austerity, which led to him being criticized by economists such as Stiglitz. programs can be controversial. In the Overseas Development Institute (ODI) briefing paper "The IMF and the Third World", the ODI addresses five major complaints against the IMF's austerity conditions | https://en.wikipedia.org/wiki?curid=684037 |
Austerity Complaints include such measures being "anti-developmental", "self-defeating", and tending "to have an adverse impact on the poorest segments of the population". In many situations, austerity programs are implemented by countries that were previously under dictatorial regimes, leading to criticism that citizens are forced to repay the debts of their oppressors. In 2009, 2010, and 2011, workers and students in Greece and other European countries demonstrated against cuts to pensions, public services, and education spending as a result of government austerity measures. Following the announcement of plans to introduce austerity measures in Greece, massive demonstrations occurred throughout the country aimed at pressing parliamentarians to vote against the austerity package. In Athens alone, 19 arrests were made, while 46 civilians and 38 policemen had been injured by 29 June 2011. The third round of austerity was approved by the Greek parliament on 12 February 2012 and met strong opposition, especially in Athens and Thessaloniki, where police clashed with demonstrators. Opponents argue that austerity measures depress economic growth and ultimately cause reduced tax revenues that outweigh the benefits of reduced public spending. Moreover, in countries with already anemic economic growth, austerity can engender deflation, which inflates existing debt. Such austerity packages can also cause the country to fall into a liquidity trap, causing credit markets to freeze up and unemployment to increase | https://en.wikipedia.org/wiki?curid=684037 |
Austerity Opponents point to cases in Ireland and Spain in which austerity measures instituted in response to financial crises in 2009 proved ineffective in combating public debt and placed those countries at risk of defaulting in late 2010. In October 2012, the IMF announced that its forecasts for countries that implemented austerity programs have been consistently overoptimistic, suggesting that tax hikes and spending cuts have been doing more damage than expected and that countries that implemented fiscal stimulus, such as Germany and Austria, did better than expected. These data have been scrutinized by the "Financial Times", which found no significant trends when outliers like Germany and Greece were excluded. Determining the multipliers used in the research to achieve the results found by the IMF was also described as an "exercise in futility" by Professor Carlos Vegh of the University of Michigan. Moreover, Barry Eichengreen of the University of California, Berkeley and Kevin H. O'Rourke of Oxford University write that the IMF's new estimate of the extent to which austerity restricts growth was much lower than historical data suggest. On 3 February 2015, Joseph Stiglitz wrote: "had failed repeatedly from its early use under US president Herbert Hoover, which turned the stock-market crash into the Great Depression, to the IMF programs imposed on East Asia and Latin America in recent decades. And yet when Greece got into trouble, it was tried again | https://en.wikipedia.org/wiki?curid=684037 |
Austerity " Government spending actually rose significantly under Hoover, while revenues were flat. Strategies that involve short-term stimulus with longer-term austerity are not mutually exclusive. Steps can be taken in the present that will reduce future spending, such as "bending the curve" on pensions by reducing cost of living adjustments or raising the retirement age for younger members of the population, while at the same time creating short-term spending or tax cut programs to stimulate the economy to create jobs. IMF managing director Christine Lagarde wrote in August 2011, "For the advanced economies, there is an unmistakable need to restore fiscal sustainability through credible consolidation plans. At the same time we know that slamming on the brakes too quickly will hurt the recovery and worsen job prospects. So fiscal adjustment must resolve the conundrum of being neither too fast nor too slow. Shaping a Goldilocks fiscal consolidation is all about timing. What is needed is a dual focus on medium-term consolidation and short-term support for growth. That may sound contradictory, but the two are mutually reinforcing. Decisions on future consolidation, tackling the issues that will bring sustained fiscal improvement, create space in the near term for policies that support growth | https://en.wikipedia.org/wiki?curid=684037 |
Austerity " Federal Reserve Chair Ben Bernanke wrote in September 2011, "the two goals—achieving fiscal sustainability, which is the result of responsible policies set in place for the longer term, and avoiding creation of fiscal headwinds for the recovery—are not incompatible. Acting now to put in place a credible plan for reducing future deficits over the long term, while being attentive to the implications of fiscal choices for the recovery in the near term, can help serve both objectives." The term "age of austerity" was popularised by UK Conservative Party leader David Cameron in his keynote speech to the Conservative Party forum in Cheltenham on 26 April 2009, in which he committed to end years of what he called "excessive government spending". Theresa May claimed that "is over" as of 3 October 2018, a statement which was almost immediately met with criticism on the reality of its central claim, particularly in relation to the high possibility of a substantial economic downturn due to Brexit. "Merriam-Webster's Dictionary" named the word "austerity" as its "Word of the Year" for 2010 because of the number of web searches this word generated that year. According to the president and publisher of the dictionary, ""austerity" had more than 250,000 searches on the dictionary's free online [website] tool" and the spike in searches "came with more coverage of the debt crisis" | https://en.wikipedia.org/wiki?curid=684037 |
Austerity According to economist David Stuckler and physician Sanjay Basu in their study "The Body Economic: Why Kills", a health crisis is being triggered by austerity policies, including up to 10,000 additional suicides that have occurred across Europe and the U.S. since the introduction of austerity programs. Much of the acceptance of austerity in the general public has centred on the way debate has been framed, and relates to an issue with representative democracy; since the public do not have widely available access to the latest economic research, which is highly critical of economic retrenchment in times of crisis, the public must rely on which politician sounds most plausible. This can unfortunately lead to authoritative leaders pursuing policies which make little, if any, economic sense. J. Bradford DeLong and Lawrence Summers explained why an expansionary fiscal policy is effective in reducing a government's future debt burden, pointing out that the policy has a positive impact on its future productivity level. They pointed out that when an economy is depressed and its nominal interest rate is near zero, the real interest rate charged to firms formula_1 is linked to the output as formula_2. This means that the rate decreases as the real GDP increases, and the actual fiscal multiplier formula_3 is higher than that in normal times; a fiscal stimulus is more effective for the case where the interest rates are at the zero bound | https://en.wikipedia.org/wiki?curid=684037 |
Austerity As the economy is boosted by government spending, the increased output yields higher tax revenue, and so we have where formula_5 is a baseline marginal tax-and-transfer rate. Also, we need to take account of the economy's long-run growth rate formula_6, as a steady economic growth rate may reduce its debt-to-GDP ratio. Then we can see that an expansionary fiscal policy is self-financing: as long as formula_9 is less than zero. Then we can find that a fiscal stimulus makes the long-term budget in surplus if the real government borrowing rate satisfies the following condition: Research by Gauti Eggertsson et al. indicates that a government's fiscal austerity measures actually increase its short-term budget deficit if the nominal interest rate is very low. In normal time, the government sets the tax rates formula_11 and the central bank controls the nominal interest rate formula_12. If the rate is so low that monetary policies cannot mitigate the negative impact of the austerity measures, the significant decrease of tax base makes the revenue of the government and the budget position worse. If the multiplier is then we have formula_14, where That is, the austerity measures are counterproductive in the short-run, as long as the multiplier is larger than a certain level formula_16. This erosion of the tax base is the effect of the endogenous component of the deficit | https://en.wikipedia.org/wiki?curid=684037 |
Austerity Therefore, if the government increases sales taxes, then it reduces the tax base due to its negative effect on the demand, and it upsets the budget balance. Supporters of austerity measures tend to use the metaphor that a government's debt is like a household's debt. They intend to convince people of the notion that the government's overspending leads to the government's default. But this metaphor has been shown to be inaccurate. For a country that has its own currency, its government can create credits by itself, and its central bank can keep the interest rate close to or equal to the nominal risk-free rate. Former FRB chairman Alan Greenspan says that the probability that the US defaults on its debt repayment is zero, because the US government can print money. The FRB of St. Louis says that the US government's debt is denominated in US dollars; therefore the government will never go bankrupt. The fear of inflation also features high on lists regarding the concerns about abandoning austerity; however, this is more ideological than practical once again, as the main means of controlling inflation is taxation, which governments also control. A number of alternative plans have been used and proposed as an alternative to implementing austerity measures, examples include: Alternatives to implementing austerity measures may utilise increased government borrowing in the short-term (such as for use in infrastructure development and public work projects) to attempt to achieve long-term economic growth. | https://en.wikipedia.org/wiki?curid=684037 |
Barclaycard (; stylized as barclaycard) is a brand for credit cards of Barclays PLC. , Barclays had over ten million customers in the United Kingdom. Barclays launched on 29 June 1966, initially as a charge card, but following Bank of England agreement to the offering of revolving credit, it became the first credit card in the United Kingdom on 8 November 1967. It enjoyed a monopoly of the credit card market in the United Kingdom, until the introduction of the Access card in October 1972. Barclays was not the first issuer of a credit card in the United Kingdom though; Diners Club and American Express launched their charge cards in 1962 and 1963 respectively. was originally a BankAmericard licensee, and became part of the Visa network on its formation in 1975. In July 2003, Barclays took over the United Kingdom wing of the American Company Providian National Bank, known as Monument, when it was sold off due to financial irregularities of its American parent company. sold the Monument business and premises to Compucredit in April 2007. In March 2011, Barclays announced that it would be buying the British credit card business arm of Egg from Citigroup for an undisclosed price. At the time of the announcement, Barclays claimed that the credit card assets consisted of 1.15 million accounts with approximately £2.3bn of gross receivables. They intended to integrate those customers within their own credit card arm | https://en.wikipedia.org/wiki?curid=685429 |
Barclaycard At the time of the announcement, Citi said it was "committed to working with Barclays on a seamless transfer of the customer accounts, ensuring continuation of the high level of service to which customers are accustomed". In June 2012, Barclays acquired Analog Analytics, a digital coupon and daily deal business similar to Groupon. During September 2014, it was announced that Barclays was to acquire The Logic Group, a based payment and loyalty business based within the United Kingdom. The procurement would enable Barclaycard's clients to benefit from The Logic Group's single-platform transaction processing capabilities, alongside data insights which would allow merchants to better target their services to customers. Toward the end of 2014, Barclays confirmed that the acquisition had since been completed. | https://en.wikipedia.org/wiki?curid=685429 |
Mechanism design is a field in economics and game theory that takes an objectives-first approach to designing economic mechanisms or incentives, toward desired objectives, in strategic settings, where players act rationally. Because it starts at the end of the game, then goes backwards, it is also called reverse game theory. It has broad applications, from economics and politics (markets, auctions, voting procedures) to networked-systems (internet interdomain routing, sponsored search auctions). studies solution concepts for a class of private-information games. Leonid Hurwicz explains that 'in a design problem, the goal function is the main "given", while the mechanism is the unknown. Therefore, the design problem is the "inverse" of traditional economic theory, which is typically devoted to the analysis of the performance of a given mechanism.' So, two distinguishing features of these games are: The 2007 Nobel Memorial Prize in Economic Sciences was awarded to Leonid Hurwicz, Eric Maskin, and Roger Myerson "for having laid the foundations of mechanism design theory". In an interesting class of Bayesian games, one player, called the "principal", would like to condition his behavior on information privately known to other players. For example, the principal would like to know the true quality of a used car a salesman is pitching. He cannot learn anything simply by asking the salesman, because it is in the salesman's interest to distort the truth | https://en.wikipedia.org/wiki?curid=689895 |
Mechanism design However, in mechanism design the principal does have one advantage: He may design a game whose rules can influence others to act the way he would like. Without mechanism design theory, the principal's problem would be difficult to solve. He would have to consider all the possible games and choose the one that best influences other players' tactics. In addition, the principal would have to draw conclusions from agents who may lie to him. Thanks to mechanism design, and particularly the revelation principle, the principal only needs to consider games in which agents truthfully report their private information. A game of mechanism design is a game of private information in which one of the agents, called the principal, chooses the payoff structure. Following , the agents receive secret "messages" from nature containing information relevant to payoffs. For example, a message may contain information about their preferences or the quality of a good for sale. We call this information the agent's "type" (usually noted formula_1 and accordingly the space of types formula_2). Agents then report a type to the principal (usually noted with a hat formula_3) that can be a strategic lie. After the report, the principal and the agents are paid according to the payoff structure the principal chose | https://en.wikipedia.org/wiki?curid=689895 |
Mechanism design The timing of the game is: In order to understand who gets what, it is common to divide the outcome formula_5 into a goods allocation and a money transfer, formula_9 where formula_10 stands for an allocation of goods rendered or received as a function of type, and formula_11 stands for a monetary transfer as a function of type. As a benchmark the designer often defines what would happen under full information. Define a formula_12 mapping the (true) type profile directly to the allocation of goods received or rendered, In contrast a mechanism maps the "reported" type profile to an "outcome" (again, both a goods allocation formula_10 and a money transfer formula_11) A proposed mechanism constitutes a Bayesian game (a game of private information), and if it is well-behaved the game has a Bayesian Nash equilibrium. At equilibrium agents choose their reports strategically as a function of type It is difficult to solve for Bayesian equilibria in such a setting because it involves solving for agents' best-response strategies and for the best inference from a possible strategic lie. Thanks to a sweeping result called the revelation principle, no matter the mechanism a designer can confine attention to equilibria in which agents truthfully report type. The revelation principle states: "To every Bayesian Nash equilibrium there corresponds a Bayesian game with the same equilibrium outcome but in which players truthfully report type." This is extremely useful | https://en.wikipedia.org/wiki?curid=689895 |
Mechanism design The principle allows one to solve for a Bayesian equilibrium by assuming all players truthfully report type (subject to an incentive compatibility constraint). In one blow it eliminates the need to consider either strategic behavior or lying. Its proof is quite direct. Assume a Bayesian game in which the agent's strategy and payoff are functions of its type and what others do, formula_18. By definition agent "i"'s equilibrium strategy formula_19 is Nash in expected utility: Simply define a mechanism that would induce agents to choose the same equilibrium. The easiest one to define is for the mechanism to commit to playing the agents' equilibrium strategies "for" them. Under such a mechanism the agents of course find it optimal to reveal type since the mechanism plays the strategies they found optimal anyway. Formally, choose formula_22 such that The designer of a mechanism generally hopes either To implement a social choice function formula_12 is to find some formula_27 transfer function that motivates agents to pick outcome formula_28. Formally, if the equilibrium strategy profile under the mechanism maps to the same goods allocation as a social choice function, we say the mechanism implements the social choice function. Thanks to the revelation principle, the designer can usually find a transfer function formula_27 to implement a social choice by solving an associated truthtelling game | https://en.wikipedia.org/wiki?curid=689895 |
Mechanism design If agents find it optimal to truthfully report type, we say such a mechanism is truthfully implementable (or just "implementable"). The task is then to solve for a truthfully implementable formula_27 and impute this transfer function to the original game. An allocation formula_28 is truthfully implementable if there exists a transfer function formula_27 such that which is also called the incentive compatibility (IC) constraint. In applications, the IC condition is the key to describing the shape of formula_27 in any useful way. Under certain conditions it can even isolate the transfer function analytically. Additionally, a participation (individual rationality) constraint is sometimes added if agents have the option of not playing. Consider a setting in which all agents have a type-contingent utility function formula_37. Consider also a goods allocation formula_28 that is vector-valued and size formula_39 (which permits formula_39 number of goods) and assume it is piecewise continuous with respect to its arguments. The function formula_28 is implementable only if whenever formula_43 and formula_44 and "x" is continuous at formula_1. This is a necessary condition and is derived from the first- and second-order conditions of the agent's optimization problem assuming truth-telling. Its meaning can be understood in two pieces | https://en.wikipedia.org/wiki?curid=689895 |
Mechanism design The first piece says the agent's marginal rate of substitution (MRS) increases as a function of the type, In short, agents will not tell the truth if the mechanism does not offer higher agent types a better deal. Otherwise, higher types facing any mechanism that punishes high types for reporting will lie and declare they are lower types, violating the truthtelling IC constraint. The second piece is a monotonicity condition waiting to happen, which, to be positive, means higher types must be given more of the good. There is potential for the two pieces to interact. If for some type range the contract offered less quantity to higher types formula_48, it is possible the mechanism could compensate by giving higher types a discount. But such a contract already exists for low-type agents, so this solution is pathological. Such a solution sometimes occurs in the process of solving for a mechanism. In these cases it must be "ironed." In a multiple-good environment it is also possible for the designer to reward the agent with more of one good to substitute for less of another (e.g. butter for margarine). Multiple-good mechanisms are an ongoing problem in mechanism design theory. papers usually make two assumptions to ensure implementability: This is known by several names: the single-crossing condition, the sorting condition and the Spence–Mirrlees condition. It means the utility function is of such a shape that the agent's MRS is increasing in type. This is a technical condition bounding the rate of growth of the MRS | https://en.wikipedia.org/wiki?curid=689895 |
Mechanism design These assumptions are sufficient to provide that any monotonic formula_28 is implementable (a formula_27 exists that can implement it). In addition, in the single-good setting the single-crossing condition is sufficient to provide that only a monotonic formula_28 is implementable, so the designer can confine his search to a monotonic formula_28. gives a celebrated result that any member of a large class of auctions assures the seller of the same expected revenue and that the expected revenue is the best the seller can do. This is the case if The last condition is crucial to the theorem. An implication is that for the seller to achieve higher revenue he must take a chance on giving the item to an agent with a lower valuation. Usually this means he must risk not selling the item at all. The Vickrey (1961) auction model was later expanded by and Groves to treat a public choice problem in which a public project's cost is borne by all agents, e.g. whether to build a municipal bridge. The resulting "Vickrey–Clarke–Groves" mechanism can motivate agents to choose the socially efficient allocation of the public good even if agents have privately known valuations. In other words, it can solve the "tragedy of the commons"—under certain conditions, in particular quasilinear utility or if budget balance is not required. Consider a setting in which formula_55 number of agents have quasilinear utility with private valuations formula_56 where the currency formula_11 is valued linearly | https://en.wikipedia.org/wiki?curid=689895 |
Mechanism design The VCG designer designs an incentive compatible (hence truthfully implementable) mechanism to obtain the true type profile, from which the designer implements the socially optimal allocation The cleverness of the VCG mechanism is the way it motivates truthful revelation. It eliminates incentives to misreport by penalizing any agent by the cost of the distortion he causes. Among the reports the agent may make, the VCG mechanism permits a "null" report saying he is indifferent to the public good and cares only about the money transfer. This effectively removes the agent from the game. If an agent does choose to report a type, the VCG mechanism charges the agent a fee if his report is pivotal, that is if his report changes the optimal allocation "x" so as to harm other agents. The payment is calculated which sums the distortion in the utilities of the other agents (and not his own) caused by one agent reporting. and give an impossibility result similar in spirit to Arrow's impossibility theorem. For a very general class of games, only "dictatorial" social choice functions can be implemented | https://en.wikipedia.org/wiki?curid=689895 |
Mechanism design A social choice function "f"() is dictatorial if one agent always receives his most-favored goods allocation, The theorem states that under general conditions any truthfully implementable social choice function must be dictatorial if, show there is no efficient way for two parties to trade a good when they each have secret and probabilistically varying valuations for it, without the risk of forcing one party to trade at a loss. It is among the most remarkable negative results in economics—a kind of negative mirror to the fundamental theorems of welfare economics. introduces a setting in which the transfer function "t"() is easy to solve for. Due to its relevance and tractability it is a common setting in the literature. Consider a single-good, single-agent setting in which the agent has quasilinear utility with an unknown type parameter formula_1 and in which the principal has a prior CDF over the agent's type formula_64. The principal can produce goods at a convex marginal cost "c"("x") and wants to maximize the expected profit from the transaction subject to IC and IR conditions The principal here is a monopolist trying to set a profit-maximizing price scheme in which it cannot identify the type of the customer. A common example is an airline setting fares for business, leisure and student travelers. Due to the IR condition it has to give every type a good enough deal to induce participation | https://en.wikipedia.org/wiki?curid=689895 |
Mechanism design Due to the IC condition it has to give every type a good enough deal that the type prefers its deal to that of any other. A trick given by Mirrlees (1971) is to use the envelope theorem to eliminate the transfer function from the expectation to be maximized, Integrating, where formula_71 is some index type. Replacing the incentive-compatible formula_72 in the maximand, after an integration by parts. This function can be maximized pointwise. Because formula_75 is incentive-compatible already the designer can drop the IC constraint. If the utility function satisfies the Spence–Mirrlees condition then a monotonic formula_28 function exists. The IR constraint can be checked at equilibrium and the fee schedule raised or lowered accordingly. Additionally, note the presence of a hazard rate in the expression. If the type distribution bears the monotone hazard ratio property, the FOC is sufficient to solve for "t"(). If not, then it is necessary to check whether the monotonicity constraint (see sufficiency, above) is satisfied everywhere along the allocation and fee schedules. If not, then the designer must use Myerson ironing. In some applications the designer may solve the first-order conditions for the price and allocation schedules yet find they are not monotonic. For example, in the quasilinear setting this often happens when the hazard ratio is itself not monotone | https://en.wikipedia.org/wiki?curid=689895 |
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