Civilisation/Economics

Glossary of Economics and Finance terms

Abenomics – the name given to a suite of measures introduced by Japanese prime minister Shinzo Abe after his 2012 re-election.

Affinity fraud – investment frauds that prey upon members of identifiable groups, such as religious or ethnic communities, language minorities, the elderly, or professional groups. The fraudsters who promote affinity scams frequently are – or pretend to be – members of the group.

Animal spirits – the term John Maynard Keynes used in his 1936 book The General Theory of Employment, Interest and Money to describe emotions which influence human behaviour and can be measured in terms of consumer confidence.

Assumptive selling – the practice of trying to sell something by acting as though the person that you are trying to sell it to has already decided to buy it.

Balance of payments – an accounting record of all monetary transactions between a country and the rest of the world.

Black–Scholes model – a mathematical model of the market for an equity, in which the equity's price is a stochastic process.

Boiler room scam – share scam where the operator will sell worthless shares at inflated prices to investors.

Cap and trade – scheme under which firms are issued with certificates allowing them to emit a limited amount of harmful gases each year (the cap). ‘Clean’ firms can store up pollution credits, which ‘dirty’ firms can then bid for, in order to avoid a fine for exceeding their quota.

Carousel fraud – occurs where fraudsters obtain VAT registration to acquire goods such as chips and mobile phones VAT-free from other Member States. They then sell on the goods at VAT inclusive prices and disappear without paying over the VAT paid by their customers to the tax authorities. Also known as missing trader fraud.

Carry trade – a trade where you borrow and pay interest in order to buy something else that has higher interest, e.g. borrowing in Japan where interest rates are low.

Classical economics – a broad term that refers to the dominant school of thought for economics in the 18th and 19th centuries. Developed by Adam Smith and David Ricardo.

Consolidated Fund – the British government's central bank account.

Consumer Price Index (CPI) – the price of a weighted average market basket of consumer goods and services purchased by households used to calculate the rate at which prices have changed over time.

Contract for difference (or CFD) – a contract between two parties, typically described as buyer and seller, stipulating that the buyer will pay to the seller the difference between the current value of an asset and its value at contract time. If the difference is negative, then the seller pays instead to the buyer.

Cost-benefit analysis – an economic tool to aid social decision-making, typically used by governments to evaluate the desirability of a given intervention in markets.

Credit easing – the practice in which central banks purchase private sector assets with a view to adding liquidity to a troubled market and so easing the flow of credit and lending in the economy.

Dark pool – a private forum for trading securities that is not openly available to the public.

Dead-cat bounce – describes a pattern wherein a moderate rise in the price of a stock follows a spectacular fall, with the connotation that the rise does not indicate improving circumstances.

Demand shock – a sudden event that increases or decreases demand for goods or services temporarily.

Derivatives – financial contracts that derive their value from other underlying instruments.

Diffusion line – a secondary line of merchandise created by a high-end fashion house or fashion designer that retails at lower prices. These ranges are separate from a fashion house's ‘signature line’ or principal artistic line that typically retail at much higher prices.

Dog stocks – stocks that underperform when the market is riding high and come into their own when others fare badly.

Dutch disease – a concept that explains the apparent relationship between the increase in exploitation of natural resources and a decline in the manufacturing sector. The term was coined in 1977 by The Economist to describe the decline of the manufacturing sector in the Netherlands after the discovery of a large natural gas field.

Economic sectors:

·        Primary: Involves the retrieval and production of raw materials, such as corn, coal, wood and iron.

·        Secondary: Involves the transformation of raw or intermediate materials into goods e.g. manufacturing steel into cars, or textiles into clothing.

·        Tertiary: Involves the supplying of services to consumers and businesses, such as baby-sitting, cinemas or banking.

Econometrics – the application of statistical and mathematical theories to economics.

Elasticity – the measurement of how responsive an economic variable is to a change in another.

Equity – the value of an asset less the value of all liabilities on that asset.

Euro Interbank Offered Rate (Euribor) is a daily reference rate based on the averaged interest rates at which Eurozone banks offer to lend unsecured funds to other banks in the euro wholesale money market (or interbank market).

Eurodollars – time deposits (bonds) denominated in US dollars at banks outside the United States, and thus are not under the jurisdiction of the Federal Reserve.

Fiscal cliff – a neologism referring to the effect of a number of laws which (if unchanged) could result in tax increases, spending cuts, and a corresponding reduction in the budget deficit. On 1 January 2013, the US "technically" went over the fiscal cliff.

Flash crash – a very rapid and deep fall in stock or security prices, followed by an immediate rebound to approximately the previous price.

Fractional-reserve banking – the banking practice in which only a fraction of a bank's demand deposits are kept as reserves (cash and other highly liquid assets) available for withdrawal.

Freebie marketing – also known as the razor and blades business model, is a business model wherein one item is sold at a low price (or given away for free) in order to increase sales of a complementary good, such as supplies.

Front running – the illegal practice of a stockbroker executing orders on a security for its own account while taking advantage of advance knowledge of pending orders from its customers.

Gold standard – a monetary system under which the government's currency is fixed and may be freely converted into gold.

Greenmail – the practice of purchasing enough shares in a firm to threaten a takeover, thereby forcing the target firm to buy those shares back at a premium in order to suspend the takeover. Portmanteau of greenback and blackmail.

Gresham’s Law – ‘Bad money drives out good’. A monetary principle stating that when there are two forms of commodity money in circulation, which are accepted by law as legal tender and the same face values, the more valuable one – ‘good money’ – will be hoarded and will disappear from circulation, while the less valuable one – ‘bad money’ – will be passed on (used for transactions). Named after Thomas Gresham, a 16th century financier.

Gross Domestic Product (GDP) – a measure of the size and health of a country’s economy over a period of time (usually one quarter or one year). There are a variety of ways to calculate it. According to the ONS it can be the summation of a) the total value of goods and services (‘output’) produced by a country; b) everyone in the country’s income; or c) what everyone in the country has spent.

Gross National Income (GNI) – a term which replaced Gross National Product (GNP) - the sum of a country’s gross domestic product (GDP) plus net income (positive or negative) from outside the country.

Hedge fund – a mutual fund that takes considerable risks, including heavy investment in unconventional instruments, in the hope of generating great profits. Alfred Winslow Jones, an ex-communist activist and friend of Ernest Hemingway, is credited with inventing hedge funds in 1949.

Hire purchase – (HP, colloquially ‘never-never)’ is the legal term for a contract, in which persons usually agree to pay for goods in parts or a percentage at a time.

Institutional economics – focuses on understanding the role of the evolutionary process and the role of institutions in shaping economic behaviour.

Interest rate swap – a financial contract between two parties (such as companies or investors) that want to exchange interest rates.

Keynesian economics – the various macroeconomic theories and models of how aggregate demand (total spending in the economy) strongly influences economic output and inflation. Named after John Maynard Keynes.

Kondratiev wave – a long-term economic cycle in commodity prices and other prices, believed to result from technological innovation, that produces a long period of prosperity alternating with economic decline. Named after Soviet economist Nikolai Kondratiev.

Laffer curve – a representation of the relationship between possible rates of taxation and the resulting levels of government revenue. Named after American economist Arthur Laffer.

Laissez faire economics – used to refer to various economic philosophies which seek to minimize or eliminate aspects of government intervention.

Law of diminishing returns – in a production system with fixed and variable inputs (say factory size and labour), beyond some point, each additional unit of the variable input yields smaller and smaller increases in output. Conversely, producing one more unit of output costs more and more in variable inputs.

Leverage – the degree to which an investor or business is utilizing borrowed money.

Liquidity – refers to how easily an investment can be sold for cash.

London Interbank Offered Rate (Libor) is the average of interest rates estimated by each of the leading banks in London that it would be charged were it to borrow from other banks.

Lowballing – the submission of falsely low rates for Libor.

Macroeconomics – the branch of economics concerned with large-scale or general economic factors, such as interest rates and national productivity.

Marginal utility – describes how much satisfaction is gained from an increase in consumption.

Mezzanine capital – a subordinated debt or preferred equity instrument that represents a claim on a company's assets which is senior only to that of the common shares. Mezzanine financings can be structured either as debt or preferred stock.

Microeconomics – the part of economics concerned with single factors and the effects of individual decisions.

Misery index – an economic indicator, created by economist Arthur Okun, and found by adding the unemployment rate to the inflation rate.

Mixed economy – an economic system in which both the state and private sector direct the economy, reflecting characteristics of both market economies and planned economies.

Mobile commerce – business that is conducted on the Internet through the use of cell phones or other wireless, handheld electronic devices.

Monetarism – an economic doctrine that stressed the importance of the money supply as an instrument of economic policy. Monetarists, notably Milton Friedman, believed that if governments simply left the economy alone and instructed the central bank to control the money supply, inflation would be banished, entrepreneurial activity would thrive, economic growth would take off and unemployment would disappear.

Monoline – insurers who operate just one line of business (insuring bonds).

Moral hazard – a situation where a party will have a tendency to take risks because the costs that could result will not be felt by the party taking the risk.

Multiplier – a factor of proportionality that measures how much a variable changes in response to a change in some other variable.

Neoclassical economics – a set of solutions to economics focusing on the determination of goods, outputs, and income distributions in markets through supply and demand. The term was originally introduced by Thorstein Veblen.

New Economy – a term to describe the result of the transition from an industrial / manufacturing-based economy. This particular use of the term was popular during the dot-com bubble of the late 1990s. The high growth, low inflation and high employment of this period led to overly optimistic predictions and many flawed business plans.

On margin – buying stocks using borrowed money.

Opportunity cost – the loss of potential gain from other alternatives when one alternative is chosen.

Pac-Man defence – a defensive option to stave off a hostile takeover in which a company that is threatened with a hostile takeover ‘turns the tables’ by attempting to acquire its would-be buyer.

Paradox of thrift – if everyone tries to save more money during times of recession, then aggregate demand will fall and will in turn lower total savings in the population because of the decrease in consumption and economic growth. Popularized by John Maynard Keynes.

Pareto distribution – is a power-law distribution (where a relative change in one quantity results in a proportional relative change in the other quantity irrespective of the initial size of those quantities) that was first proposed as a model for the distribution of incomes.

Pareto efficiency – states that an economy can’t be made more efficient by reallocating resources without making someone worse off.

Pareto principle – states that 80% of outcomes (or outputs) result from 20% of causes (or inputs).

Peak oil – an event based on M. King Hubbert's theory, is the point in time when the maximum rate of extraction of petroleum is reached, after which it is expected to enter terminal decline.

Peer-to-peer lending – (P2P lending) is the practice of lending money to previously unrelated individuals or ‘peers’ without the intermediation of traditional financial institutions (banks). The first company to offer peer-to-peer loans in the United Kingdom was Zopa (which stood for Zone of Possible Agreement).

Phillips curve – states that there is an inverse relationship between the rate of unemployment and the rate of inflation in an economy. Named after New Zealand economist William Phillips.

Ponzi scheme – a fraudulent investment operation that involves paying abnormally high returns to investors out of the money paid in by subsequent investors, rather than from net revenues generated by any real business. Named after Italian swindler Charles Ponzi.

Purchasing power parity – (PPP) is a condition between countries where an amount of money has the same purchasing power in different countries. The prices of the goods between the countries would only reflect the exchange rates. One such PPP is the ‘Big Mac Index’ using the price of a McDonald’s burger as the base product.

Pyramid scheme – a non-sustainable business model that involves the exchange of money primarily for enrolling other people into the scheme, usually without any product or service being delivered.

Quantitative easing – a tool of monetary policy. A central bank injects new money into the financial system, in order to increase the supply of money. 'Quantitative' refers to the money supply; 'easing' refers to reducing the pressure on banks.

Resale price maintenance – (RPM) is the practice whereby a manufacturer and its distributors agree that the distributors will sell the manufacturer's product at certain prices.

Retail Price Index (RPI) – a measure of inflation published monthly by the ONS (Office for National Statistics) which measures the change in the cost of a representative sample of retail goods and services.

Saltwater and freshwater economics – the freshwater school comprises US-based macroeconomists who challenged the prevailing consensus in macroeconomics research. The established methodological approach to macroeconomic research was primarily defended by economists in the saltwater school.

Scrip issue – an issue of shares made by a company free of charge to existing shareholders. Also called a bonus issue.

Short selling – the sale of a security made by an investor who does not own the security. The short sale is made in expectation of a decline in the price.

Specific tax – a system of taxation where the level of tax is fixed independent of the value of the item being purchased.

Stagflation – a portmanteau term coined for the twin economic problems of stagnation and inflation. The term is generally attributed Iain Macleod, who coined the phrase in his speech to Parliament in 1965.

Stoozing – the act of borrowing money at an interest rate of 0%, a rate typically offered by credit card companies as an incentive for new customers. The money is then placed in a high interest bank account to make a profit from the interest earned.

Straw purchase or nominee purchase – any purchase wherein an agent agrees to acquire a good or service for someone who is unable or unwilling to purchase the good or service themselves, and the agent transfers the goods/services to that person after purchasing them.

Subprime lending – the provision of loans to people who may have difficulty maintaining the repayment schedule. Many subprime loans were packaged into mortgage-backed securities (MBS) and ultimately defaulted, contributing to the 2008 financial crisis.

Supply side economics – a school of macroeconomic thought that argues that economic growth can be most effectively created using incentives for people to produce (supply) goods and services.

Tax inversion – the relocation of a corporation's headquarters to a lower-tax nation, or corporate haven, usually while retaining its material operations in its higher-tax country of origin.

Tontine – an investment scheme for raising capital, devised in the 17th century. It combines features of a group annuity and a lottery. Each subscriber pays an agreed sum into the fund, and thereafter receives an annuity. As members die, their shares devolve to the other participants, and so the value of each annuity increases. On the death of the last member, the scheme is wound up. Named after Neapolitan banker Lorenzo de Tonti

Toxic assets – loans sold to a third-party which cannot be repaid.

Transfer pricing – the price that is assumed to have been charged by one part of a company for products and services it provides to another part of the same company, in order to calculate each division's profit and loss separately.

Trickle-down economics and trickle-down theory – terms of political rhetoric that refer to the policy of providing across the board tax cuts or benefits to businesses, such as tax breaks, in the belief that this will indirectly benefit the broad population. The term has been attributed to humourist Will Rogers, who said during the Great Depression that "money was all appropriated for the top in hopes that it would trickle down to the needy”.

Truck system – an arrangement in which employees are paid in commodities or some currency substitute (referred to as scrip), rather than with standard money. This limits employees' ability to choose how to spend their earnings. In the UK the Truck system was sometimes referred to as the Tommy system.

Value at Risk – (VaR) is a widely used risk measure of the risk of loss on a specific portfolio of financial assets.

Value chain – a business model that describes the full range of activities needed to create a product or service.

Volcker rule – aims to restrict United States banks from making certain kinds of speculative investments that do not benefit their customers. The rule was originally proposed by former United States Federal Reserve Chairman Paul Volcker.

White Knight – a person or company making an acceptable counteroffer for a company facing a hostile takeover bid.

Working capital – is calculated as current assets minus current liabilities.

Zero-based budgeting – is a method of budgeting in which all expenses must be justified and approved for each new period.

International organisations

ASEAN Free Trade Area (AFTA) is a free trade bloc formed by South East Asian countries originally formed in 1992. Its current members are Brunei, Indonesia, Malaysia, Philippines, Singapore, Thailand, Myanmar, Cambodia, Laos and Vietnam.

Council for Mutual Economic Assistance (Comecon) was an economic organisation from 1949 to 1991 under the leadership of the Soviet Union that comprised the countries of the Eastern Bloc along with a number of socialist states elsewhere in the world. The Comecon was the Eastern Bloc's reply to the formation of the OECD in Western Europe.

European Coal and Steel Community (ECSC) was an international organisation serving to unify European countries after World War II. It was formally established by the Treaty of Paris of 1951, which was signed by Belgium, France, West Germany, Italy, the Netherlands and Luxembourg. The ECSC would ultimately lead the way to the founding of the European Union.

European Economic Community (EEC) was an international organisation created by the Treaty of Rome of 1957. Upon the formation of the European Union in 1993 following the Maastricht Treaty, the EEC was incorporated and renamed as the European Community (EC). In 2009 the EC's institutions were absorbed into the EU's wider framework and the community ceased to exist.

European Free Trade Association (EFTA) is a regional free trade association founded under The Stockholm Convention in 1960 by Austria, Denmark, Norway, Portugal, Sweden, Switzerland and the United Kingdom. Its current members are Iceland, Liechtenstein, Norway and Switzerland.

Eurogroup is a meeting of the finance ministers of the eurozone, i.e. those member states of the European Union which have adopted the euro as their official currency.

General Agreement on Tariffs and Trade (GATT) was a multilateral agreement regulating international trade. GATT was signed by 23 nations in Geneva in 1947 and took effect on 1 January 1948. It lasted until the signature by 123 nations in Marrakesh in 1994 of the Uruguay Round Agreements, which established the World Trade Organization (WTO) on 1 January 1995.

International Monetary Fund (IMF) was created at the 1944 Bretton Woods Conference. The IMF is based in Washington, D.C. The organisation's objectives are: to promote international economic cooperation, international trade, employment, and exchange-rate stability, including by making financial resources available to member countries to meet balance-of-payments needs. There are currently 190 members.

Mercosur is a Regional Trade Agreement between Brazil, Argentina, Uruguay and Paraguay, founded in 1991 by the Treaty of Asuncion, which was later amended and updated by the 1994 Treaty of Ouro Preto. Its purpose is to promote free trade and the fluid movement of goods, peoples, and currency. Venezuela is a full member but has been suspended since 1 December 2016.

North American Free Trade Agreement (NAFTA) was an agreement signed by Canada, Mexico, and the United States that created a trade bloc in North America. The agreement came into force in 1994. NAFTA was replaced by the United States–Mexico–Canada Agreement (USMCA) in 2020.

Organization for Economic Co-operation and Development (OECD) is an international economic organization of 38 countries founded in 1961 to stimulate economic progress and world trade.

Paris Club is an informal group of financial officials from 22 of the world's richest countries, which provides financial services such as debt restructuring, debt relief, and debt cancellation to indebted countries and their creditors. Debtors are often recommended by the International Monetary Fund after alternative solutions have failed. The club grew out of crisis talks held in Paris in 1956 between the nation of Argentina and its various creditors. India is an observer state.

World Trade Organization (WTO) was founded in 1995. Governments use the organization to establish, revise, and enforce the rules that govern international trade. Headquarters are in Geneva. The WTO is the world's largest international economic organization, with 164 member states representing over 98% of global trade and global GDP.

The WTO Doha Development Round of negotiations aims to lower trade barriers around the world, permitting free trade between countries of varying prosperity. Talks have been hung up over a divide between the European Union and the United States and the major developing countries.

Economists

Irving Fisher (1867 – 1947) was one of the earliest American neoclassical economists. The Fisher equation estimates the relationship between nominal and real interest rates under inflation. He developed a theory of economic crises called debt-deflation.

Milton Friedman (1912 – 2006) was one of the leaders of the Chicago school of economics. He promoted a macroeconomic viewpoint known as Monetarism and argued that a steady, small expansion of the money supply was the preferred policy, as compared to rapid, and unexpected changes. Friedman was an advisor to Ronald Reagan and Margaret Thatcher. He used the phrase "There ain't no such thing as a free lunch" to describe opportunity cost. Awarded the 1976 Nobel Prize in Economics.

Capitalism and Freedom (1962) – is an influential series of essays that established Friedman's position on major issues of public policy.

Alan Greenspan (born 1926) was appointed Federal Reserve chairman by President Ronald Reagan in 1987, and was reappointed at successive four-year intervals until retiring in January 2006. Many have argued that the "easy-money" policies of the Fed during Greenspan's tenure were a leading cause of the dot-com bubble and subprime mortgage crisis.

John Kenneth Galbraith (1908 – 2006) was a Canadian-American economist who was active in Democratic Party politics. He was employed by Harvard University for half a century as a professor of economics.

American Capitalism (1952) – concluded that the American economy was managed by a triumvirate of big business, big labour, and an activist government.

The Affluent Society (1958) – outlines Galbraith’s view that to become successful, post–World War II America should make large investments in items such as highways and education, using funds from general taxation.

The New Industrial State (1967) – asserts that within the industrial sectors of modern capitalist societies, the traditional mechanism of supply and demand is supplanted by the planning of large corporations, using techniques such as advertising and, where necessary, vertical integration.

Friedrich Hayek (1899 – 1992) was born in Vienna and served in World War I. He is best known for his defence of classical liberalism. Hayek's account of how changing prices communicate information which enables individuals to coordinate their plans is widely regarded as an important achievement in economics. He believed that the markets should regulate themselves without government intervention. Awarded the 1974 Nobel Prize in Economics.

The Road to Serfdom (1944) – condemned economic intervention by government as a precursor to an authoritarian state.

The Constitution of Liberty (1960) – referred to civilization as being made possible by the fundamental principles of liberty. The book was held up at a British Conservative Party policy meeting and banged on the table by Margaret Thatcher, who reportedly interrupted a presentation to indicate, in reference to the book, that "This is what we believe".

John Maynard Keynes (1883 – 1946) advocated the use of fiscal and monetary measures to mitigate the adverse effects of economic recessions and depressions. Keynes is widely considered to be one of the founders of modern macroeconomics, and the most influential economist of the 20th century. In 1925 Keynes married a Diaghilev ballerina, Lydia Lopokova.

The Economic Consequences of the Peace (1919) – argues for a generous peace, not out of a desire for justice or fairness, but for the sake of the economic well-being of all of Europe. Keynes attended the Paris Peace Conference of 1919 as a delegate of the British Treasury.

The General Theory of Employment, Interest, and Money (1936) – laid the foundations for macroeconomics. Keynes argued that government must intervene in the economy, directing wages, investment, and demand, in order to achieve full employment and end the boom-and-bust cycle. In so doing, a middle way was found between the laissez-faire policy of classical political economy, as founded by Adam Smith in the 18th century, and the complete state control of socialist governments, derived from Marx's theories of the 19th century. Keynes's system of controlled capitalism defined much of the 20th century.

Paul Krugman (born 1953) is Distinguished Professor of Economics at the Graduate Center of the City University of New York, and a columnist for The New York Times. Awarded the Nobel Prize in Economics in 2008 for his contributions to New Trade Theory and New Economic Geography.

The Conscience of a Liberal (2007) – studies the past 80 years of American history in the context of economic inequality.

Alfred Marshall (1842 – 1924) desired to improve the mathematical rigour of economics and transform it into a more scientific profession.

Principles of Economics (1890) – was the standard text for generations of economics students. It brought the ideas of supply and demand, marginal utility, and costs of production into a coherent whole.

Carl Menger (1840 – 1921) was the founder of the Austrian School of economics, that was methodologically opposed to the younger Historical School (based in Germany).

Principles of Economics (1871) – was one of the first modern treatises to advance the theory of marginal utility.

Ludwig von Mises (1881 – 1973) was born to Jewish parents in Lemberg, Galicia, Austria-Hungary (now Lviv, Ukraine) and emigrated to the United States in 1940. He was a member of the Austrian School and wrote extensively on the societal contributions of classical liberalism.

Elinor Ostrom (1933 – 2012) was an American political economist, and studied the interaction of people and ecosystems for many years, showing that the use of exhaustible resources by groups of people can be rational and prevent depletion of the resource without government intervention. She became the first woman to be awarded the Nobel Prize in Economics, winning in 2009.

Vilfredo Pareto (1848 – 1923) was born of an exiled noble Genoese family in Paris and worked as a civil engineer before moving into economics. He introduced the concept of Pareto efficiency and helped develop the field of microeconomics. The Pareto principle was named after him, and it was built on observations of his such as that 80% of the wealth in Italy belonged to about 20% of the population.

Arthur Cecil Pigou (1877 – 1959) was a teacher and builder of the School of Economics at the University of Cambridge. Pigou effect is the stimulation of output and employment caused by increasing consumption due to a rise in real balances of wealth, particularly during deflation.

The Economics of Welfare (1920) – introduced the concept of externality.

David Ricardo (1772 – 1823) was a political economist and the Member of Parliament for the rotten borough of Portarlington in Ireland. He was a classical economist best known for his theory on wages and profit, the labour theory of value, the theory of comparative advantage, and the theory of rents.

On the Principles of Political Economy and Taxation (1817) – introduced the theory of comparative advantage, the theory that free trade between two or more countries can be mutually beneficial, even when one country has an absolute advantage over the other countries in all areas of production.

Paul Samuelson (1915 – 2009) contributed significantly to the mathematical foundations of economics. First American to be awarded the Nobel Prize in Economics, in 1970.

Economics (1948) – was the best-selling economics textbook for many decades and remains popular.

Joseph Schumpeter (1883 – 1950) – was born in Triesch, Moravia, Austria-Hungary (now Trest, Czech Republic) and emigrated to the United States in 1932. He was a political economist and a professor at Harvard.

Capitalism, Socialism, and Democracy (1942) – introduced the term 'creative destruction' to describe innovative entry by entrepreneurs as the force that sustains long-term economic growth, even as it destroys the value of established companies that have enjoyed some degree of monopoly power.

Adam Smith (1723 – 1790) was a key figure during the Scottish Enlightenment and laid the foundations of classical free market economic theory.

The Theory of Moral Sentiments (1759) – examines the moral thinking of his time. The book introduced the term ‘invisible hand’ to describe the unintended social benefits of individual self-interested actions.

An Inquiry into the Nature and Causes of the Wealth of Nations (1776) – aka The Wealth of Nations is considered to be the first modern work of economics. The book attributes the growth of wealth and prosperity to the division of labour, and introduces the principle of absolute advantage, i.e. the ability of a party (an individual, or firm, or country) to produce a good or service more efficiently than its competitors.

George Stigler (1911 – 1991) was a leading figure in the Chicago school of economics. His Theory of Economic Regulation argued that government agencies were often “captured” by the very industries they were supposed to regulate. Awarded the Nobel Prize in Economics in 1982.

Joseph Stiglitz (born 1943) is known for his critical view of globalisation, free-market economists (whom he calls “free market fundamentalists”) and some international institutions like the International Monetary Fund and the World Bank. He served as chief economist of the World Bank from 1997 to 2000. Awarded the Nobel Prize for Economics in 2001.

Whither Socialism? (1994) – presents a summary of information economics and the theory of markets with imperfect information and imperfect competition.

Globalization and Its Discontents (2002) – demonstrates how the IMF (International Monetary Fund), other major institutions like the World Bank, and global trade agreements have often harmed the developing nations they are supposedly helping.

Making Globalization Work (2006) – examines the failures of the globalised system of world trade and proposes a number of reforms that could bring greater fairness and equality to the poorest nations.

The Price of Inequality (2012) – argues that inequality adversely affects the US economy because it hampers growth and efficiency.

Richard Thaler (born 1945) is a theorist in behavioural economics and is best-known for nudge theory, that proposes positive reinforcement and indirect suggestions as ways to influence the behavior and decision-making of groups or individuals. Awarded the Nobel Prize in Economics in 2017.

Nudge: Improving Decisions about Health, Wealth, and Happiness (2008) – is a book written by Richard Thaler and Cass Sunstein that popularised the concept of nudge theory.

James Tobin (1918 – 2002) is widely known for his suggestion of a tax on foreign exchange transactions, now known as the "Tobin tax". He also proposed an econometric model known as the tobit model. Awarded the Nobel Prize in Economics in 1981.