A Anti-classical or backing theory Another issue associated with classical political economy is the anti-classical hypothesis of money, or "backing

theory". The backing theory argues that the value of money is determined by the assets and liabilities of the issuing agency. Unlike the Quantity Theory of classical political economy, the backing theory argues that issuing authorities can issue money without causing inflation so long as the money issuer has sufficient assets to cover redemptions. There are very few backing theorists, making quantity theory the dominant theory explaining inflation. B 'Big-push' Theory This theory is an investment theory which stresses the conditions of take-off. The argumentation is quite similar to the balanced growth theory but emphasis is put on the need for a big push. The investments should be of a relatively high minimum in order to reap the benefits of external economies. Only investments in big complexes will result in social benefits exceeding social costs. High priority is given to infrastructural development and industry, and this emphasis will lead to governmental development planning and influence. Binary economics Binary economics is a heterodox theory of economics that endorses both private property and a free market but proposes significant reforms to the banking system. The aim of binary economics is to ensure that all individuals receive income from their own independent capital estate, using interest-free loans issued by a central bank to promote the spread of employee-owned firms. These loans are intended to: halve infrastructure improvement costs, reduce business startup costs, and widen stock ownership. Bottom of the pyramid In economics, the bottom of the pyramid is the largest, but poorest socio-economic group. In global terms, this is the 2.5 billion people who live on less than $2.50 per day.[1] The phrase bottom of the pyramid is used in particular by people developing new models of doing business that deliberately target that demographic, often using new technology. This field is also often referred to as the "Base of the Pyramid" or just the "BoP". Buffer theory

In the late 1950s a number of European countries (most notably West Germany and France) decided on a migration policy known as the Buffer theory. Owing to rapid economic recovery in the post WWII period (aided by the American Marshall plan) there were many more job vacancies than people who were available or becoming available in the workforce to fill them. To resolve this situation they decided to "import" workers from the southern Mediterranean basin (including North Africa) on a temporary capacity to fill this labour shortfall. C CalmforsDriffill hypothesis The CalmforsDriffill hypothesis is a macroeconomic theory in labour economics that states that there is a non-linear relationship between the degree of collective bargaining in an economy and the level of unemployment. Specifically, it states that the relationship is roughly that of an 'inverted U': as trade union size increases from nil, unemployment increases, and then falls as unions begin to exercise monopoly power. It was advanced by Lars Calmfors and John Driffill in their 1988 paper Bargaining structure, corporatism and macroeconomic performance. The rationale is related to Mancur Olson's idea, from The Rise and Decline of Nations, that organised interests are at their most harmful when they do not internalise significant amounts of the costs they impose on society, but become less harmful as their interest becomes encompassing enough to suffer the costs Causal decision theory Causal decision theory is a school of thought within decision theory which maintains that the expected utility of actions should be evaluated with respect to their potential causal consequences. It contrasts with evidential decision theory, which recommends those actions that, conditional on having been performed, will make the actor have the happiest expectations about the outcome. Choice theory The term choice theory is the work of William Glasser, MD, author of the book so named, and is the culmination of some 50 years of theory and practice in psychology and counseling. Choice Theory posits that behavior is central to our existence and is driven by five genetically driven needs, similar to those of Abraham Maslow:

Survival (food, clothing, shelter, breathing, personal safety and others)

And four fundamental psychological needs:

Belonging/connecting/love Power/significance/competence Freedom/autonomy, and Fun/learning

Classical test theory Classical test theory is a body of related psychometric theory that predict outcomes of psychological testing such as the difficulty of items or the ability of test-takers. Generally speaking, the aim of classical test theory is to understand and improve the reliability of psychological tests. Classical theory of growth and stagnation Classical economics refers to work done by a group of economists in the eighteenth and nineteenth centuries. The theories developed mainly focused on the way market economies functioned. Classical Economics study mainly concentrates on the dynamics of economic growth. The generalized classical theory on growth and stagnation is a combination of the contributions of Adam Smith, David Ricardo and Robert Malthus. The theory was put together by combining the common stands of thought, within the individual growth theories, of these renowned classical economists. To understand the generalized classical theory of growth and stagnation, let us first look into the individual theories propagated by each of the three economists in detail. Cluster theory Cluster theory is a theory of strategy. Alfred Marshall, in his book Principles of Economics, published in 1890, first characterised clusters as a "concentration of specialised industries in particular localities" that he termed industrial districts. Coasian solution A Coasian Solution, named after the economist Ronald Coase, is an economics solution resulting from the use of the Coase Theorem to achieve economic efficiency in the presence of externalities without government intervention.. Cobweb model The cobweb model or cobweb theory is an economic model that explains why prices might be subject to periodic fluctuations in certain types of markets. It describes cyclical supply and demand in a market where the amount produced must be chosen before

prices are observed. Producers' expectations about prices are assumed to be based on observations of previous prices. Nicholas Kaldor analyzed the model in 1934, coining the term 'cobweb theorem' (see Kaldor, 1938 and Pashigian, 2008), citing previous analyses in German by Henry Schultz and U. Ricci. Comparative advantage comparative advantage, economic theory, first developed by 19th-century English economist David Ricardo, that attributed the cause and benefits of international trade to the differences among countries in the relative opportunity costs (costs in terms of other goods given up) of producing the same commodities. In Ricardos theory, which was based on the labour theory of value (in effect, making labor the only factor of production), the fact that one country could produce everything more efficiently than another was not an argument against international trade. Conley index theory In dynamical systems theory, Conley index theory, named after Charles Conley, analyzes topological structure of invariant sets of diffeomorphisms and of smooth flows. It is a far-reaching generalization of the Hopf index theorem that predicts existence of fixed points of a flow inside a planar region in terms of information about its behavior on the boundary. Conley's theory is related to Morse theory, which describes the topological structure of a closed manifold by means of a nondegenerate gradient vector field. It has an enormous range of applications to the study of dynamics, including existence of periodic orbits in Hamiltonian systems and travelling wave solutions for partial differential equations, structure of global attractors for reaction-diffusion equations and delay differential equations, proof of chaotic behavior in dynamical systems, and bifurcation theory. Conley index theory formed the basis for development of Floer homology. Consumer choice Consumer choice is a theory of microeconomics that relates preferences for consumption goods and services to consumption expenditures and ultimately to consumer demand curves. The link between personal preferences, consumption, and the demand curve is one of the most closely studied relations in economics. Consumer choice theory is a way of analyzing how consumers may achieve equilibrium between preferences and expenditures by maximizing utility as subject to consumer budget constraints. Contract theory

In economics, contract theory studies how economic actors can and do construct contractual arrangements, generally in the presence of asymmetric information. Because of its connections with both agency and incentives, contract theory is often categorized within a field known as Law and economics. One prominent application of it is the design of optimal schemes of managerial compensation. In the field of economics, the first formal treatment of this topic was given by Kenneth Arrow in the 1960s.

Cost-of-production theory of value In economics, the cost-of-production theory of value is the theory that the price of an object or condition is determined by the sum of the cost of the resources that went into making it. The cost can compose any of the factors of production (including labor, capital, or land) and taxation. Costs push theory The cost push theory of economics is the theory that inflation occurs when producers raise prices to meet increased cost. Critical minimum effort theory The critical minimum effort theory has been given by Harvey Leibenstein, in his book Economic Backwardness and Economic Growth. This theory relates to overpopulated and underdeveloped or developing nations such as India and Indonesia.This theory is based on Malthusian theory of population. Cultural Theory of risk The Cultural Theory of risk, often referred to simply as Cultural Theory (with capital letters; not to be confused with culture theory), consists of a conceptual framework and an associated body of empirical studies that seek to explain societal conflict over risk. Whereas other theories of risk perception stress economic and cognitive influences, Cultural Theory asserts that structures of social organization endow individuals with perceptions that reinforce those structures in competition against alternative ones. Originating in the work of anthropologist Mary Douglas and political scientist Aaron Wildavsky, Cultural Theory has given rise to a diverse set of research programs that span multiple social science disciplines and that have in recent years been used to analyze policymaking conflicts generally. Cyclical theory The cyclical theory refers to a model used by historian Arthur Schlesinger to attempt to explicate the fluctuations in politics throughout American History. Liberalism and

conservatism are rooted in the national mood that shows a continuing shift in national involvement between public purpose and private interest. Each of these cycles includes a phase of dominant public interest, a transition phase, and a phase of prevalent private interest. D Decision field theory Decision Field Theory (DFT), is a dynamic - cognitive approach to human decision making. It is a cognitive model that describes how people make decisions rather than a rational model that prescribes what people should do. It is also a dynamic model of decision making rather than a static model, because it describes how a person's preferences evolve across time until a decision is reached rather than assuming a fixed state of preference. The preference evolution process is mathematically represented as a stochastic process called a diffusion process. It is used to predict how humans make decisions under uncertainty, how decisions change under time pressure, and how choice context changes preferences. This model can be used to predict not only the choices that are made but also decision or response times. The Decision Field Theory (DFT) was published by Jerome R. Busemeyer and James T. Townsend in 1993[1]. The DFT has been shown to account for many puzzling findings regarding human choice behavior including violations of stochastic dominance, violations of strong stochastic transitivity, violations of independence between alternatives, serial position effects on preference, speed accuracy tradeoff effects, inverse relation between probability and decision time, changes in decisions under time pressure, as well as preference reversals between choices and prices. The DFT also offers a bridge to neuroscience. Recently, the authors of decision field theory also have begun exploring a new theoretical direction called Quantum Cognition. Decision theory Decision theory in economics, psychology, philosophy, mathematics, and statistics is concerned with identifying the values, uncertainties and other issues relevant in a given decision, its rationality, and the resulting optimal decision. It is closely related to the field of game theory as to interactions of agents with at least partially conflicting interests whose decisions affect each other. Demand Theory A theory relating to the relationship between consumer demand for goods and services and their prices. Demand theory forms the basis for the demand curve, which relates consumer desire to the amount of goods available. As more of a good or service is available, demand drops and therefore so does the equilibrium price. Demand theory is one of the core theories of microeconomics. It aims to answer basic questions about how badly people want things, and how demand is impacted by income

levels and satisfaction (utility). Based on the perceived utility of goods and services by consumers, companies adjust the supply available and the prices charged. Demand-pull theory In economics, the demand-pull theory is the theory that inflation occurs when demand for goods and services exceeds existing supplies. According to the demand pull theory, there is a range of effects on innovative activity driven by changes in expected demand, the competitive structure of markets, and factors which affect the valuation of new products or the ability of firms to realize economic benefits. Dependency theory World systems theory builds on but also parts from the proposition of dependency theory. Fernando Henrique Cardoso described the main tenets of the dependency theories as follows:

there is a financial and technological penetration of the periphery and semiperiphery countries by the developed capitalist core countries this produces an unbalanced economic structure within the peripheral societies and among them and the centers this leads to limitations upon self-sustained growth in the periphery this favors the appearance of specific patterns of class relations these require modifications in the role of the state to guarantee the functioning of the economy and the political articulation of a society, which contains, within itself, foci of inarticulateness and structural imbalance

Dependency and world system theory propose that the poverty and backwardness of poor countries are caused by their peripheral position in the international division of labor. Since the capitalist world system evolved, the distinction among the central and the peripheral nations has grown. In recognizing a tripartite pattern in division of labor, world-systems analysis criticized dependency theory with its bimodal system of only cores and peripheries. Developmentalism Developmentalism is an economic theory which states that the best way for Third World countries to develop is through fostering a strong and varied internal market and to impose high tariffs on imported goods.

Diamond model

The Porter diamond The diamond model is an economical model developed by Michael Porter in his book The Competitive Advantage of Nations, where he published his theory of why particular industries become competitive in particular locations. Afterwards, this model has been expanded by other scholars. Dualism Theories Dualism theories assume a split of economic and social structures of different sectors so that they differ in organization, level of development, and goal structures. Usually, the concept of economic dualism (BOEKE 1) differentiates between two sectors of economy:

the traditional subsistence sector consists of small-scale agricul ture, handicraft and petty trade, has a high degree of labour intensity but low capital intensity and little division of labour; the modern sector of capital-intensive industry and plantation agriculture produces for the world market with a capital-intensive mode of production with a high division of labour.

The two sectors have little relation and interdependence and develop each according to its own pattern. The modern sector can be considered an economic enclave of industrial countries, and its multipli-cator and growth effects will benefit the industrial countries but have little effect on the internal market. Dumb Agent Theory This is the theory that my thesis is based on. It is a theory that has been observed time and time again, although never proven per se. I am applying this theory to a futures market, which I believe can be used as an indicator; in my case, for Foreign Direct Investment.

Eclectic paradigm The eclectic paradigm is a theory in economics and is also known as the OLI-Model or OLI-Framework. It is a further development of the theory of internalization and published by John H. Dunning in 1980. The theory of internalization itself is based on the transaction cost theory this theory says that transactions are made within an institution if the transaction costs on the free market are higher than the internal costs. This process is called internalization. Economic liberalism Economic liberalism is the ideological belief in giving all people economic freedom, and as such granting people with more basis to control their own lives and make their own mistakes. It is an economic philosophy that ideally supports and promotes individual liberty and choice in economic matters and private property in the means of production. Although economic liberalism can be supportive of government regulation to a certain degree, it tends to oppose government intervention in the free market when it inhibits free trade and open competition, however it can also lead to the support of government intervention in order to remove private monopoly, as this limits the liberty of the poor. Economic liberalism emphasizes that people should make their own choices with their money, so long as it doesn't infringe on the liberty of others. Economic problem The economic problem, sometimes called the basic, central or fundamental economic problem, is one of the fundamental economic theories in the operation of any economy. It asserts that there is scarcity, or that the finite resources available are insufficient to satisfy all human wants and needs. The problem then becomes how to determine what is to be produced and how the factors of production (such as capital and labor) are to be allocated. Economics revolves around methods and possibilities of solving the economic problem. In short, the economic problem is the choice one must make, arising out of limited means and unlimited wants. Endogenous Growth Theory An economic theory which argues that economic growth is generated from within a system as a direct result of internal processes. More specifically, the theory notes that the enhancement of a nation's human capital will lead to economic growth by means of the development of new forms of technology and efficient and effective means of production.

Evidential decision theory Evidential decision theory is a school of thought within decision theory according to which the best action is the one which, conditional on your having chosen it, gives you the best expectations for the outcome. It contrasts with causal decision theory, which requires a causal connection between your actions and the desirable outcome. Expected utility hypothesis In economics, game theory, and decision theory the expected utility hypothesis is a theory of utility in which "betting preferences" of people with regard to uncertain outcomes (gambles) are represented by a function of the payouts (whether in money or other goods), the probabilities of occurrence, risk aversion, and the different utility of the same payout to people with different assets or personal preferences. This theory has proved useful to explain some popular choices that seem to contradict the expected value criterion (which takes into account only the sizes of the payouts and the probabilities of occurrence), such as occur in the contexts of gambling and insurance. Daniel Bernoulli initiated this theory in 1738. Until the mid-twentieth century, the standard term for the expected utility was the moral expectation, contrasted with "mathematical expectation" for the expected value. The von NeumannMorgenstern utility theorem provides necessary and sufficient "rationality" axioms under which the expected utility hypothesis holds.

External Trade Theories The structure of supply and demand in industrialized and developing countries is such that industrialized countries are able to reap the benefits from international trade. This transfer of resources makes development impossible, and these unequal trade relations are seen as the reasons for underdevelopment. F Fed model The "Fed model" is a theory of equity valuation that has found broad application in the investment community. The model compares the stock markets earnings yield (E/P) to the yield on long-term government bonds. In its strongest form the Fed model states that bond and stock market are in equilibrium, and fairly valued, when the one year forward looking earnings yield equals the 10-year Treasury note yield (Y10):

The model is often used as a simple tool to measure attractiveness of equity, and to help allocating funds between equity and bonds. When for example the equity earnings yield is above the government bond yield, investors should shift funds from bonds into equity. The Fed model was so named by Ed Yardeni, at Deutsche Morgan Grenfell, based on a statement made in the Humphrey-Hawkins report of July 22, 1997 issued by the Federal Reserve that warned: changes in this ratio [P/E of the S&P 500 index] have often been inversely related to changes in the long-term Treasury yields, but this year's stock price gains were not matched by a significant net decline in interest rates. As a result, the yield on ten-year Treasury notes now exceeds the ratio of twelve-monthahead earnings to prices by the largest amount since 1991, when earnings were depressed by the economic slowdown. Fisher hypothesis In economics, the Fisher hypothesis (sometimes Fisher parity) is the proposition by Irving Fisher that the real interest rate is independent of monetary measures, especially the nominal interest rate. The Fisher equation is

This means, the real interest rate ( ) equals the nominal interest rate ( ) minus expected rate of inflation ( ). Here all the rates are continuously compounded. For simple rates, the Fisher equation takes form of

If is assumed to be constant, must rise when rises. Fisher Effect: The one for one adjustment of the nominal interest rate to the expected inflation rate. To understand the relationship between money, inflation and interest rates it is important to understand nominal interest rate and real interest rate. The nominal interest rate is the interest rate you hear about at your bank. If you have a savings account, for instance, the nominal interest rate tells you how fast the number of dollars in your account will rise over time. The real interest rate corrects the nominal rate for the effect of inflation in order to tell you how fast the purchasing power of your savings account will raise over time. An easy estimation of the real interest rate is the nominal interest rate minus the expected inflation rate (Note that this estimate is unwise when looking at compounded savings.)

Real interest rate = Nominal Interest Rate - Expected Inflation Rate Nominal Interest Rate = Real interest Rate + Expected Inflation Rate If inflation permanently rises from a constant level, let's say 4%/yr., to a constant level, say 8%/yr., that currency's interest rate would eventually catch up with the higher inflation, rising by 4 points a year from their initial level. These changes leave the real return on that currency unchanged. The Fisher Effect is an evidence that in the longrun, purely monetary developments will have no effect on that country's relative prices. It has been contended that the Fisher hypothesis may break down in times of both quantitative easing and financial sector recapitalisation. First possession theory of property The "first possession" theory of property holds that ownership of something is justified simply by someone seizing it before someone else does. This contrasts with the labor theory of property where something may become property only by applying productive labor to it, i.e. by making something out of the materials of nature. Full employment

Diagram of macroeconomic circulation. LS LD is the full employment situation, one in which the rate of unemployment is zero or negative (corresponding to a labor shortfall). Full employment, in macroeconomics, is the level of employment rates when there is no cyclical unemployment. It is defined by the majority of mainstream economists as being an acceptable level of natural unemployment above 0%, the discrepancy from 0% being due to non-cyclical types of unemployment. Unemployment above 0% is

advocated as necessary to control inflation, which has brought about the concept of the Non-Accelerating Inflation Rate of Unemployment (NAIRU); the majority of mainstream economists mean NAIRU when speaking of "full" employment. G Game theory Game theory is a method of studying strategic decision making. More formally, it is "the study of mathematical models of conflict and cooperation between intelligent rational decision-makers." An alternative term suggested "as a more descriptive name for the discipline" is interactive decision theory. Game theory is mainly used in economics, political science, and psychology, and other, more prescribed sciences, like logic and biology. The subject first addressed zero-sum games, such that one person's gains exactly equal net losses of the other participant(s). Today, however, game theory applies to a wide range of class relations, and has developed into an umbrella term for the logical side of science, to include both human and non-humans, like computers. Classic uses include a sense of balance in numerous games, where each person has found or developed a tactic that cannot successfully better his results, given the other approach. Generalizability theory Generalizability theory, or G Theory, is a statistical framework for conceptualizing, investigating, and designing reliable observations. It is used to determine the reliability (i.e., reproducibility) of measurements under specific conditions. It is particularly useful for assessing the reliability of performance assessments. It was originally introduced in Cronbach, L.J., Nageswari, R., & Gleser, G.C. (1963). H Hubbert peak theory The Hubbert peak theory posits that for any given geographical area, from an individual oil-producing region to the planet as a whole, the rate of petroleum production tends to follow a bell-shaped curve. It is one of the primary theories on peak oil. The Hubbert peak theory is based on the observation that the amount of oil under the ground in any region is finite; therefore the rate of discovery which initially increases quickly must reach a maximum and decline. In the US, oil extraction followed the discovery curve after a time lag of 32 to 35 years. The theory is named after American geophysicist M. King Hubbert, who created a method of modeling the production curve given an assumed ultimate recovery volume. I

Imperialism Theory The imperialism theory explains the domination of underdeveloped areas by industrialized countries as the consequence of different economic and technological levels and unequal power potential resulting from a different economic growth. The consequence of the development of industrial capitalistic societies is a pressure for expansion which may lead to military or political acquisition (colonies) or to maintaining economic dependence (developing countries). Different theories have their own explanation of the reason for the pressure for expansion but it is always seen as the result of the inability to cope internally with the consequences of permanent technological innovation and their effects on the society. Intergovernmentalism is an alternative theory of political integration, where power in international organizations is possessed by the member-states and decisions are made by unanimity. Independent appointees of the governments or elected representatives have solely advisory or implementation functions. Intergovernmentalism is used by most international organizations today. An alternative method of decision-making in international organizations is supranationalism. Invisible Hand. In economics, invisible hand or invisible hand of the market is the term economists use to describe the self-regulating nature of the marketplace. This is a metaphor first coined by the economist Adam Smith. The exact phrase is used just three times in his writings, but has come to capture his important claim that by trying to maximize their own gains in a free market, individual ambition benefits society, even if the ambitious have no benevolent intentions. Item response theory In psychometrics, item response theory (IRT) also known as latent trait theory, strong true score theory, or modern mental test theory, is a paradigm for the design, analysis, and scoring of tests, questionnaires, and similar instruments measuring abilities, attitudes, or other variables. It is based on the application of related mathematical models to testing data. Because it is generally regarded as superior to classical test theory, it is the preferred method for the development of high-stakes tests such as the Graduate Record Examination (GRE) and Graduate Management Admission Test (GMAT). Iron law of wages The Iron Law of Wages is a proposed law of economics that asserts that real wages always tend, in the long run, toward the minimum wage necessary to sustain the life of the worker. The theory was first named by Ferdinand Lassalle in the mid-nineteenth

century. Karl Marx and Friedrich Engels attribute the doctrine to Lassalle (notably in Critique of the Gotha Programme (1875), Marx), crediting the idea to Thomas Malthus in his work, An Essay on the Principle of Population, and the terminology to Goethe's "great, eternal iron laws" in Das Gttliche. K Keynesian Economics An economic theory stating that active government intervention in the marketplace and monetary policy is the best method of ensuring economic growth and stability. A supporter of Keynesian economics believes it is the government's job to smooth out the bumps in business cycles. Intervention would come in the form of government spending and tax breaks in order to stimulate the economy, and government spending cuts and tax hikes in good times, in order to curb inflation. Knowledge-based theory of the firm The knowledge-based theory of the firm considers knowledge as the most strategically significant resource of a firm. Its proponents argue that because knowledge-based resources are usually difficult to imitate and socially complex, heterogeneous knowledge bases and capabilities among firms are the major determinants of sustained competitive advantage and superior corporate performance. This knowledge is embedded and carried through multiple entities including organizational culture and identity, policies, routines, documents, systems, and employees. Originating from the strategic management literature, this perspective builds upon and extends the resource-based view of the firm (RBV) initially promoted by Penrose (1959) and later expanded by others (Wernerfelt 1984, Barney 1991, Conner 1991). L Labor theory of property The labor theory of property or labor theory of appropriation or labor theory of ownership is a natural law theory that holds that property originally comes about by the exertion of labor upon natural resources. It is also called the principle of first appropriation or the homestead principle. Labor theory of value The labor theories of value (LTV) are heterodox economic theories of value which argue that the value of a commodity is related to the labor needed to produce or obtain that commodity. The concept is most often associated with Marxian economics.

Legal origins theory In economics, the legal origins theory states that many aspects of a country's economic state of development are the result of their legal system, most of all where a particular country received its law from. The first papers on the theory were published from 1997 onwards by a group of researchers around Andrei Shleifer. Learning-by-doing Learning-by-doing is a concept within economic theory. It refers to the capability of workers to improve their productivity by regularly repeating the same type of action. The increased productivity is achieved through practice, self-perfection and minor innovations. The concept of learning-by-doing has been used by Kenneth Arrow in his design of endogenous growth theory to explain effects of innovation and technical change. Robert Lucas, Jr.(1988) adopted the concept to explain increasing returns to embodied human capital. Yang and Borland (1991) have shown learning-by-doing plays a role in the evolution of countries to greater specialization in production. In both these cases, learning-by-doing and increasing returns provide an engine for long run growth. Recently, it has become a popular explaining concept in the evolutionary economics and Resource-Based View (RBV) of the firm. Toyota Production System is known for Kaizen that is explicitly built upon learning-bydoing effects. Legal origins theory In economics, the legal origins theory states that many aspects of a country's economic state of development are the result of their legal system, most of all where a particular country received its law from. The first papers on the theory were published from 1997 onwards by a group of researchers around Andrei Shleifer.

Life Cycle Hypothesis The Life Cycle Hypothesis (LCH) is an economic concept analyzing individual consumption patterns. The life-cycle hypothesis considers that individuals plan their consumption and savings behavior over the long term and intend to even out their consumption in the best possible manner over their entire lifetimes. The key assumption is that all individuals choose to maintain stable lifestyles. This implies that they usually

don't save up a lot in one period to spend furiously in the next period, but keep their consumption levels approximately the same in every period. Linkage principle The linkage principle is a finding of auction theory. It states that auction houses have an incentive to pre-commit to revealing all available information about each lot, positive or negative. The linkage principle is seen in the art market with the age-old tradition of auctioneers hiring art experts to examine each lot and pre-commit to provide a truthful estimate of its value. The discovery of the linkage principle was most useful in determining optimal strategy for countries in the process of auctioning off drilling rights (as well as other natural resources, such as logging rights in Canada). An independent assessment of the land in question is now a standard feature of most auctions, even if the seller country may believe that the assessment is likely to lower the value of the land rather than confirm or raise a pre-existing valuation. Failure to reveal information leads to the winning bidder incurring the discovery costs himself and lowering his maximum bid due to the expenses incurred in acquiring information. If he is not able to get an indepent assessment, then his bids will take into account the possibility of downside risk. Both scenarios can be shown to lower the expected revenue of the seller. The expected sale price is raised by lowering these discovery costs of the winning bidder, and instead providing information to all bidders for free. Lipstick effect The lipstick effect is the theory that when facing an economic crisis consumers will be more willing to buy less costly luxury goods .Instead of buying expensive fur coats, for example, people will buy expensive lipstick It has been rumored that lipstick sales doubled after the 9/11 attacks on the USA, however, other sources say this is an overstatement. In a New York Times in article published May 1, 2008, Leonard Lauder is quoted as saying that he noted his company's sales of lipstick rose after the terrorist attacks. He did not claim they doubled. The underlying assumption is that consumers will buy luxury goods even if there is a crisis. When consumer trust in the economy is dwindling, consumers will buy goods that have less impact on their available funds. Outside the cosmetics market, consumers could be tempted by expensive beer or smaller, less costly gadgets.

Juliet Shor in her book, The over Spent American, talks to consumer's purchase of higher-priced, more prestigious lipsticks, specifically Chanel, that are used in public, vs. lower-priced, less prestigious brands that are used in privacy of the bathroom.

Liquidity premium Liquidity premium is a term used to explain a difference between two types of financial securities (e.g. stocks), that have all the same qualities except liquidity. For example: Liquidity premium is a segment of a three-part theory that works to explain the behavior of yield curves for interest rates. The upwards-curving component of the interest yield can be explained by the liquidity premium. The reason behind this is that short term securities are less risky compared to long term rates due to the difference in maturity dates. Therefore investors expect a premium, or risk premium for investing in the risky security. Liquidity risk premiums are recommended to be used with longer term investments, where those particular investments are illiquid. Or Assets that are traded on an organized market are more liquid. Financial disclosure requirements are more stringent for quoted companies. For a given economic result, organized liquidity and transparency make the value of quoted share higher than the market value of an unquoted share. The difference in the prices of two assets, which are similar in all aspects except liquidity, is called the liquidity premium.

Living systems theory Living systems theory is an offshoot of von Bertalanffy's general systems theory, created by James Grier Miller, which was intended to formalize the concept of "life". According to Miller's original conception as spelled out in his magnum opus Living Systems, a "living system" must contain each of 20 "critical subsystems", which are defined by their functions and visible in numerous systems, from simple cells to organisms, countries, and societies. In Living Systems Miller provides a detailed look at a number of systems in order of increasing size, and identifies his subsystems in each. James Grier Miller (1978) wrote a 1,102 pages volume to present his living systems theory. He constructed a general theory of living systems by focusing on concrete systemsnonrandom accumulations of matter-energy in physical space-time organized into interacting, interrelated subsystems or components. Slightly revising the original model a dozen years later, he distinguished eight "nested" hierarchical levels in such complex structures. Each level is "nested" in the sense that each higher level contains the next lower level in a nested fashion.

Lump-sum tax A lump-sum tax is a tax that is a fixed amount, no matter the change in circumstance of the taxed entity. (A lump-sum subsidy or lump-sum redistribution is defined similarly.) It is one of the various modes used for taxation: income, things owned (property taxes), money spent (sales taxes), miscellaneous (excise taxes). It is a regressive tax, such that the lower the income is, the higher the percentage of income applicable to the tax. An example is a poll tax to vote, which is unchanged no matter what the income of the voter. Other related examples include personal property taxes on cars or business equipment regardless of income or ability to pay. Real estate taxes that are levied on a per lot or per unit basis are another example; some condominium fees could be regarded as having most of the characteristics of a lump sum tax (other than being avoidable by not owning property in a condominium). In economic theory, a lump-sum tax may have the advantage of not contributing to an excess burden of taxation, a loss in economic efficiency that results from taxes reducing incentives for production. In practice, lump-sum taxes are often encountered, in spite of their conflict with other criteria, such as equity or ability to pay. A lump-sum tax remains a standard for measuring the performance of other imperfect kinds of taxes (J. de V. Graaf, 1987).

M Malthusianism Malthusianism refers primarily to ideas derived from the political/economic thought of Reverend Thomas Robert Malthus, as laid out initially in his 1798 writings, An Essay on the Principle of Population, which describes how unchecked population growth is exponential (1248) while the growth of the food supply was expected to be arithmetical (1234). Malthus believed there were two types of "checks" that could then reduce the population, returning it to a more sustainable level. Malthusian Theory of Population Thomas Robert Malthus was the first economist to propose a systematic theory of population. He articulated his views regarding population in his famous book, Essay on the Principle of Population (1798), for which he collected empirical data to support his thesis. Malthus had the second edition of his book published in 1803, in which he

modified some of his views from the first edition, but essentially his original thesis did not change. Malthusian trap The Malthusian trap, named after political economist Thomas Robert Malthus, suggests that for most of human history, income was largely stagnant because technological advances and discoveries only resulted in more people, rather than improvements in the standard of living. It is only with the onset of the Industrial Revolution in about 1800 that the income per person dramatically increased in some countries, and they broke out of the Trap; it has been shown, however, that the escape from the Malthusian trap can also generate serious political upheavals. Malthusian Theory of Development T. R. Malthus pioneered the theory of population and linked it with development. According to Malthus, population growth is the end product of the whole process of economic development. However, the increase in population cannot take place without proportionate increase in wealth. He was of the opinion that mere increase in population cannot provide a stimulus to economic expansion. In his view, population growth promotes development only when it brings an increase in eff'edive demand. Malthus contended that the process of growth is not automatic and easy. It needs a conscious deliberate effort on the part of the people to promote growth. He did not see any movement of the economy towards a stationary state, but, he emphasized that the economy may reach slumps many times before it achieved an optimum level of development. Therefore, the process of development consists of many ups and downs, and the journey is not a smooth one.

Market socialism Market socialism refers to various economic systems where the means of production are either publicly owned or cooperatively owned and operated for a profit in a market economy. The profit generated by the firms system would be used to directly remunerate employees or would be the source of public finance. Theoretically, the fundamental difference between market socialism and a traditional socialist economy is the existence of a market for the means of production and capital goods. Marxism

Marxism is an economic and social system based upon the political and economic theories of Karl Marx and Friedrich Engels. While it would take veritably volumes to explain the full implications and ramifications of the Marxist social and economic

ideology, Marxism is summed up in the Encarta Reference Library as a theory in which class struggle is a central element in the analysis of social change in Western societies. Marxism is the antithesis of capitalism which is defined by Encarta as an economic system based on the private ownership of the means of production and distribution of goods, characterized by a free competitive market and motivation by profit. Marxism is the system of socialism of which the dominant feature is public ownership of the means of production, distribution, and exchange. Marginal productivity theory In economics, the theory that firms will pay a productive agent only what he or she adds to the financial earnings of the firm. Developed by writers such as John Bates Clark and Philip Henry Wick steed at the end of the 19th century, marginal productivity theory holds that it is unprofitable to buy, for example, a man-hour of labor if it costs more than it contributes to its buyer's income. The amount in excess of costs that a productive input yields is the value of its marginal product; the theory posits that every type of input should be paid the value of its marginal product.

Marginalist theory Marginalism explains choice with the hypothesis that people decide whether to effect any given change based on the marginal utility of that change, with rival alternatives being chosen based upon which has the greatest marginal utility. Mindful economics Mindful economics is an approach to economic theory and practice that is dedicated to institutional reform based on the core values of environmental sustainability, social justice, and stability. The approach was founded by economist, Joel Magnuson, who is most known for his book, Mindful Economics: How the U.S. Economy Works, Why It Matters, and How It Could Be Different, NY: Seven Stories Press, 2008. The central premise of mindful economics is that the dominant institutions in America have created destructive social and environmental conditions, and changing these conditions requires a deep exploration and development of alternative institutions. Mindful economics is based on empirical evidence of the destructive conditions that can be found in a number of areas such as widespread environmental destruction, resource depletion, and global warming; the vast inequality of wealth and income distribution; and the banking crisis of 2008. It is also based on empirical evidence of how people have confronted and can confront these problems directly by fostering change through the development of noncapitalist institutions. Examples of such institutions would be locally based community

cooperatives, small businesses, and public institutions that are all structured around the same core values. Monetary theory British classical economists in the 19th century had a well-developed controversy between the Banking and the Currency school. This parallels recent debates between proponents of the theory of endogenous money, such as Nicholas Kaldor, and monetarists, such as Milton Friedman. Monetarists and members of the currency school argued that banks can and should control the supply of money. According to their theories, inflation is caused by banks issuing an excessive supply of money. According to proponents of the theory of endogenous money, the supply of money automatically adjusts to the demand, and banks can only control the terms (e.g., the rate of interest) on which loans are made. Monetarism Monetarism is an economic theory which focuses on the macroeconomic effects of the supply of money and central banking. Formulated by Milton Friedman, it argues that excessive expansion of the money supply is inherently inflationary, and that monetary authorities should focus solely on maintaining price stability. Monopolistic advantage theory The monopolistic advantage theory is an approach in international business which explains why firms can compete in foreign settings against indigenous competitors. Moral hazard In economic theory, moral hazard is a tendency to take undue risks because the costs are not borne by the party taking the risk. The term defines a situation where the behavior of one party may change to the detriment of another after a transaction has taken place. For example, a person with insurance against automobile theft may be less cautious about locking their car, because the negative consequences of vehicle theft are now (partially) the responsibility of the insurance company. A party makes a decision about how much risk to take, while another party bears the costs if things go badly, and the party insulated from risk behaves differently from how it would if it were fully exposed to the risk. N

Neofeudalism Neofeudalism (literally new feudalism the terms are used interchangeably in the literature) refers to a theorized contemporary rebirth of policies of governance, economy and public life reminiscent of those present in many feudal societies. It is related to some of the ideas of neo-medievalism. Neofunctionalism Neofunctionalism is a theory of regional integration, building on the work of Ernst B. Haas, an American political scientist and also Leon Lindberg, an American political scientist. Jean Monnet's approach to European integration, which aimed at integrating individual sectors in hopes of achieving spill-over effects to further the process of integration, is said to have followed the neofunctional school's tack. Haas later declared the theory of neofunctionalism obsolete, after the process of European integration started stalling in the 1960s, when Charles de Gaulle's "empty chair" politics paralyzed the institutions of the European Coal and Steel Community, European Economic Community, and European Atomic Energy Community. The theory was updated and further specified namely by Wayne Sandholtz, Alec Stone Sweet, and their collaborators in the 1990s and in 2000s (references below). The main contributions of these authors were an employment of empiricism. Neofunctionalism describes and explains the process of regional integration with reference to how three causal factors interact with one another: (a) growing economic interdependence between nations, (b) organizational capacity to resolve disputes and build international legal regimes, and (c) supranational market rules that replace national regulatory regimes. Noisy market hypothesis In finance, the noisy market hypothesis contrasts the efficient-market hypothesis in that it claims that the prices of securities are not always the best estimate of the true underlying value of the firm. It argues that prices can be influenced by speculators and momentum traders, as well as by insiders and institutions that often buy and sell stocks for reasons unrelated to fundamental value, such as for diversification, liquidity and taxes. These temporary shocks referred to as "noise" can obscure the true value of securities and may result in mispricing of these securities for many years.

New Growth Theory An economic growth theory that posits humans' desires and unlimited wants foster everincreasing productivity and economic growth. The new growth theory argues that real

GDP per person will perpetually increase because of people's pursuit of profits. As competition lowers the profit in one area, people have to constantly seek better ways to do things or invent new products in order to garner a higher profit. This main idea is one of the central tenets of the theory. New Trade Theory New Trade Theory (NTT) is a collection of economic models in international trade which focuses on the role of increasing returns to scale and network effects, which were developed in the late 1970s and early 1980s. New Trade theorists relaxed the assumption of constant returns to scale, and some argue that using protectionist measures to build up a huge industrial base in certain industries will then allow those sectors to dominate the world market. O Organizational theory The systems framework is also fundamental to organizational theory as organizations are complex dynamic goal-oriented processes. One of the early thinkers in the field was Alexander Bogdanov, who developed his Tectology, a theory widely considered a precursor of von Bertalanffy's GST, aiming to model and design human organizations (see Mattessich 1978, Capra 1996). Kurt Lewin was particularly influential in developing the systems perspective within organizational theory and coined the term "systems of ideology", from his frustration with behavioral psychologies that became an obstacle to sustainable work in psychology. Jay Forrester with his work in dynamics and management alongside numerous theorists including Edgar Schein that followed in their tradition since the Civil Rights Era have also been influential. Olduvai theory The Olduvai theory states that industrial civilization (as defined by per capita energy production) will have a lifetime of less than or equal to 100 years (1930-2030). The theory provides a quantitative basis of the transient-pulse theory of modern civilization. The name is a reference to the Olduvai Gorge in Tanzania. P Post-Marxist Theory

Poststructuralist Marxism, or post-Marxism, is a theoretical viewpoint that elaborates and revises the work of Louis Althusser and Michel Foucault. Unlike traditional Marxism, which emphasizes the priority of class struggle and the common humanity of oppressed

groups, post-Marxism reveals the sexual, racial, class, and ethnic divisions of modern Western society. This book surveys the different versions of post-Marxist theory: the economic theory of Stephen Resnick and Richard Wolff, the historical methodology of Michel Foucault, the political theory of Ernesto Laclau and Chantal Mouffe, the feminism of Judith Butler, the materialist philosophy of Pierre Macherey, and the cultural studies of Tony Bennett and John Frow. Providing a coherent framework for these otherwise quite divergent theorists, Philip Goldstein outlines the history of Marxist philosophical or theoretical views and explains how they all count as post-Marxist. Policy Ineffectiveness Proposition (PIP) The Policy Ineffectiveness Proposition (PIP) is a new classical theory proposed in 1976 by Thomas J. Sargent and Neil Wallace based upon the theory of rational expectations. It posited that monetary policy could not systematically manage the levels of output and employment in the economy. Power theory of economics Developed by Yasuma Takada in a series of lectures at Kyoto University, the power theory of economics is mostly based on a critique of both mainstream economics as well asheterodox economics theories of unemployment, most notably Keynsian economics and Marxian economics. The theory accommodates Thorstein Veblen, Vilfredo Pareto and Joseph Schumpeter. Takada sometimes referred to the theory as a second order approximation, as introducing a theory of power relations into the materialism of economics was seen as one step closer to a true picture of socio-economic relationships.

Power theory of value Nitzan and Bichler argue that it was never possible to separate economics from politics. This separation is required to allow for neoclassical economics to base their theory on utility value and for Marxists to base the labour theory of value on quantified abstract labour. Instead of a utility theory of value (like neoclassical economics) or a labour theory of value (as found in Marxist economics), Nitzan and Bichler propose a power theory of value. The structure of prices has little to do with the so-called "material" sphere of production and consumption. The quantification of power in prices is not the consequence of external laws whether natural or historical but entirely internal to society. Progressive theory of capital The progressive theory of capital is an economic theory posited by Lon Walras in 1874 in part 5 of his book Elements of Pure Economics

Public choice theory In economics, public choice theory is the use of modern economic tools to study problems that traditionally are in the province of political science. From the perspective of political science, it may be seen as the subset of positive political theory which deals with subjects in which material interests are assumed to predominate. In particular, it studies the behavior of politicians and government officials as mostly self-interested agents and their interactions in the social system either as such or under alternative constitutional rules. These can be represented in a number of ways, including standard constrained utility maximization, game theory, or decision theory. Public choice analysis has roots in positive analysis ("what is") but is often used for normative purposes ("what ought to be"), to identify a problem or suggest how a system could be improved by changes in constitutional rules. Another related field is social choice theory.

Push-Pull Theory Push pull theory can be applied to many facets of life. Its applicable to both the business world and the dating world. In the dating world its used as a method to generate attraction while simultaneously getting past a womens bitch shield.

Q Query theory Query Theory (QT) is a theory that proposes that preferences are constructed (rather than pre-stored and immediately retrievable, as assumed by many economic models) by individuals in accordance with the answers to one or more internally posed questions, or queries. Further, the order of such queries is dependent on the structure of the choice situation or task, and can influence retrieval of information, leading to different decisions. This is a descriptive model that attempts to explain why individuals make a decision, rather than propose an optimal decision. R Rahn curve The Rahn curve is an economic theory, developed by Richard Rahn, which proposes that there is a level of government spending which maximises economic growth. The

theory is used by classical liberals to argue for a decrease in overall government spending and taxation. The curve suggests the optimal level of government spending is 1525% of GDP. Ragnar Nurkse's balanced growth theory The balanced growth theory is an economic theory pioneered by the economist Ragnar Nurkse (19071959). The theory hypothesises that the government of any underdeveloped country needs to make large investments in a number of industries simultaneously.[1][2] This will enlarge the market size, increase productivity, and provide an incentive for the private sector to invest. Rational choice theory Rational choice theory, also known as choice theory or rational action theory is a framework for understanding and often formally modeling social and economic behavior. It is the main theoretical paradigm in the currently-dominant school of microeconomics. Rationality (here equated with "wanting more rather than less of a good") is widely used as an assumption of the behavior of individuals in microeconomic models and analysis and appears in almost all economics textbook treatments of human decision-making. It is also central to some of modern political science and is used by some scholars in other disciplines such as sociology and philosophy. It is the same as instrumental rationality, which involves seeking the most cost-effective means to achieve a specific goal without reflecting on the worthiness of that goal. Gary Becker was an early proponent of applying rational actor models more widely. He won the 1992 Nobel Memorial Prize in Economic Sciences for his studies of discrimination, crime, and human capital. Rational expectations theory Rational expectations theory holds that economic actors look rationally into the future when trying to maximize their well-being, and do not respond solely to immediate opportunity costs and pressures. In this view, while generally grounded in monetarism, future expectations and strategies are important for inflation as well. Real business cycle theory Within mainstream economics, Keynesian views have been challenged by real business cycle models in which fluctuations are due to technology shocks. This theory is most associated with Finn E. Kydland and Edward C. Prescott, and more generally the Chicago school of economics (freshwater economics). They consider that economic crisis and fluctuations cannot stem from a monetary shock, only from an external shock, such as an innovation.

Romer's Growth Theory Growth Theory is about long term economic growth, abstracting from business cycles. Given the power of compounding, and the ephemeral and intractable nature of business cycles, it is rather a shame for most economists to focus on recessions because over they don't matter too much over time. Sure, the East Germany had fewer recessions than West Germany, but over a couple generations, West Germany had 3 times the living standard. Wisdom is primarily prioritizing tasks according to importance and solubility. S Scitovsky paradox The Scitovsky paradox is a theory which states that in welfare economics there is no increase in social welfare by a return to the original part of the losers. It is named after the Hungarian born American economist, Tibor Scitovsky. Social cycle theory Social cycle theories are among the earliest social theories in sociology. Unlike the theory of social evolutionism, which views the evolution of society and human history as progressing in some new, unique direction(s), sociological cycle theory argues that events and stages of society and history are generally repeating themselves in cycles. Such a theory does not necessarily imply that there cannot be any social progress. In the early theory of Sima Qian and the more recent theories of long-term ("secular") political-demographic cycles as well as in the Varnic theory of P.R. Sarkar an explicit accounting is made of social progress. Social rule system theory Social rule system theory is an attempt to formally approach different kinds of social rule systems in a unified manner. Social rules systems include institutions such as norms, laws, regulations, taboos, customs, and a variety of related concepts and are important in the social sciences and humanities. Social rule system theory is fundamentally an institutionalist approach to the social sciences, both in its placing primacy on institutions and in its use of sets of rules to define concepts in social theory

Staples thesis The staples thesis is a theory of Canadian economic development. The theory has its origins in research into Canadian social, political, and economic history carried out in Canadian universitiesby members of what were then known as departments of political economy. From these groups of researchers, the two most prominent scholars following this approach were Harold Innis and W.A. Mackintosh.[1] During the 1990s, it was revived by Daniel Drache through his work on resource capitalism and Canadian political economy.

'Supply-Side Theory An economic theory holding that bolstering an economy's ability to supply more goods is the most effective way to stimulate economic growth. Supply-side theorists advocate income tax reduction because it increases private investment in corporations, facilities, and equipment. Systems theory Systems theory is the interdisciplinary study of systems in general, with the goal of elucidating principles that can be applied to all types of systems at all nesting levels in all fields of research. The term does not yet have a well-established, precise meaning, but systems theory can reasonably be considered a specialization of systems thinking, a generalization of systems science, a systems approach. The term originates from Bertalanffy's General System Theory (GST) and is used in later efforts in other fields, such as the action theory of Talcott Parsons and the system-theory of Niklas Luhmann. In this context the word systems is used to refer specifically to self-regulating systems, i.e. that are self-correcting through feedback. Self-regulating systems are found in nature, including the physiological systems of our body, in local and global ecosystems, and in climate - and in human learning processes. T Technology gap The technology gap theory describes an advantage enjoyed by the country that introduces new goods in a market. As a consequence of research activity and entrepreneurship, new goods are produced and the innovating country enjoys a monopoly until the other countries learn to produce these goods: in the meantime they

have to import them. Thus, international trade is created for the time necessary to imitate the new goods (imitation lag). Time Preference Theory of Interest The time preference theory of interest is an attempt to explain interest through the demand for accelerated satisfaction. This is particularly important in microeconomics. Theory of Balanced Growth This theory sees the main obstacles to development in the narrow market and, thus, in the limited market opportunities. Under these circumstances, only a bundle of complementary investments realized at the same time has the chance of creating mutual demand. The theory refers to Say's theorem and requests investments in such sectors which have a high relation between supply, purchasing power, and demand as in consumer goods industry, food production, etc. Theory of Circular Causation Myrdal opposes the strategy of development poles because social systems and economic processes do not develop towards equilibrium but, on the contrary, factors tend to cumulate to positive or negative cycles. Under laissez faire' conditions in developing countries, there is a tendency towards a negative accumulation. In principle, Myrdal's theory is a negation of the monocausal explanation of problems of developing countries by economic factors alone. Rather, in a comprehensive way, all social relations have to be incorporated. At national leveldifferent stages of development between regionsas well as international level trade between industrialized and developing countriesdifferences tend to increase because of the spread effects in the more developed areas and modern sectors and backwash effects in backward areas and traditional sectors. For instance, industrial import goods are in competition with traditional crafts; terms of trade deteriorate; capital is being transferred, etc. The direction of processes depends on the initial situation and the factors causing the change. Under the conditions in developing countries, increased regional dualism often is a consequence of such processes of circular causation. Theory of conjoint measurement The theory of conjoint measurement (also known as conjoint measurement or additive conjoint measurement) is a general, formal theory of continuous quantity. It was independently discovered by the French economist Gerard Debreu (1960) and by the American mathematical psychologist R. Duncan Luce and statistician John Tukey (Luce & Tukey, 1964).

Theory of Development Poles The promotion of regional development centres will serve as focal point and incentive for further development. Such a regional concentration helps to reap the benefits of technological external economies and makes the growth centre attractive to entrepreneurs, thus initiating further development. This theory is a sort of 'regional unbalanced growth theory' which uses temporary regional imbalances to initiate development. Little attention is given to the process which is necessary to ensure a spread or linkage from the centres to the hinterland without which the poles may transform the economy of the region into a dual economy. Theory of the firm The theory of the firm consists of a number of economic theories that describe the nature of the firm, company, or corporation, including its existence, behavior, structure, and relationship to the market.

The theory of the firm goes along with the theory of the consumer, which states that consumers seek to maximize their overall utility. Modern takes on the theory of the firm sometimes distinguish between long-run motivations (sustainability) and short-run motivations (profit maximization). Theory of Immiserizing Growth This theory follows the argumentation of the theory of circular deterioration of terms of trade and concludes that countries, in order to improve their balance of trade, have to increase their exports to compensate for falling prices. This means a further deterioration of terms of trade. The unchanged structure of supply intensifies the structural dependency and, regardless of growth, there is no development but only 'immiserizing growth.' This situation is especially pertinent for countries with agrarian monoculture. As a consequence, BHAGWATI later asked for a speedy industrialization including heavy industry for larger countries.

The Theory of Interstellar Trade The stand up economist, has a post to Paul Krugman's humorous article on the Theory of Interstellar Trade. The Cartoon Introduction of Economics, by Grady Klein and Yoram Bauman is superb. It covers microeconomics. Because of this book, I learned easier ways to teach hard concepts such as marginal decision making. My favorite part of the book was auctions. Theory of intervening opportunities

Theory of intervening opportunities attempts to describe the likelihood of migration. Its hypothesis is that this likelihood is influenced most by the opportunities to settle at the destination, less by distance or population pressure at the starting point. The Theory of Natural Limits The Theory of Natural limits was introduced by American economist and author Tom Osenton is his 2004 book The Death of Demand: Finding Growth in a Saturated Global Economy (Financial Times Prentice Hall) and states that every product or service has a natural consumption level that is determined after a number of years of sales and marketing investment (usually around 2025 years). In effect, a relative universe of regular users is naturally established over time after which any significant expansion of that universe becomes extraordinarily difficult. The point at which natural limits are reached is known as Innovation saturation. Theories of post-Fordism Post-Fordism can be applied in a wider context to describe a whole system of modern social processes. Because Post-Fordism describes the world as it is today, various thinkers have different views of its form and implications. As the theory continues to evolve, it is commonly divided into three schools of thought: Flexible Specialization, Neo-Schumpeterianism, and the Regulation School. Theories of poverty Theories on the causes of poverty are the foundation upon which poverty reduction strategies are based. While in developed nations poverty is often seen as either a personal or a structural defect, in developing nations the issue of poverty is more profound due to the lack of governmental funds. Some theories on poverty in the developing world focus on cultural characteristics as a retardant of further development. Other theories focus on social and political aspects that perpetuate poverty; perceptions of the poor has a significant impact on the design and execution of programs to alleviate poverty. Theory of Productive Forces

The term "Theory of Productive Forces" should not be confused with the Marxist analysis of productive forces that is a cornerstone of Marxist theory. The Theory of Productive Forces (sometimes referred to as productive force determinism) is a widely-used concept in communism and Marxism placing primary emphasis on technical advances and strong productive forces in a nominally socialist

economy before real communism, or even real socialism, can have a hope of being achieved. Theory of Stages of Growth This theory tries to explain the long-term processes of economic development from the point of view of economic history by describing five ideal types of stages through which all societies pass: Theory of storage The Theory of Storage describes features observed in commodity markets: When inventory levels of the commodity in question are high:

Futures prices tend to be in contango The volatility of spot and futures prices tend to be low, and equal

When inventory levels of the commodity are low:

Futures prices tend to be in backwardation The volatility of nearby futures prices are raised compared with the volatility of long term futures prices

The theory of storage was originally developed and described by Holbrook Working in 1933. Theory of Social Change Following McClelland's concept that a level of development is correlated with achievement motivation, Hagen tried to explain why this achievement motivation varies between societies and their classes and strata. He argues that in traditional societies the status of individuals is fixed. Children learn to act according to established norms, and deviations (initiative !) are punished. If by external influences a new group gains power, the status of the old elite is challenged and weakened. The insecurity and frustration leads to changed behaviour which has consequences on the family structure. Children tend to become dissatisfied with the society and readily accept new values. In time, they become innovative personalities. If these persons become dominant groups in the society, this causes economic development. Similar phenomena may happen as far as the changing situation of marginal groups or minorities is concerned. Theory of value "Theory of value" is a generic term which encompasses all the theories within economics that attempt to explain the exchange value or price of goods and services.

Key questions in economic theory include why goods and services are priced as they are, how the value of goods and services comes about, and for normative value theories how to calculate the correct price of goods and services (if such a value exists). Toothpaste tube theory There are different theories, in different formulations, which each have been popularly called the toothpaste tube theory. These theories usually are based on the observation that when one squeezes one end of the toothpaste tube, toothpaste is inevitably extruded from the other end. This is intended as an analogy to the fact that pressure built up in some finite bounded system needs to be released somewhere or the system will break. Although, prima facie, the theory is an explanation about the movement of physical objects, it has also been used to explain social and political behavior, as well as relationships involving abstract concepts. Tournament Theory Economic theory traditionally explains income differences in terms of marginal productivity. If Bill can lay 50 bricks per hour, we expect him to earn twice as much Joe who can lay only 25 bricks per hour because there would be a profit opportunity for building contractors if any other wage rate existed. If the more productive mason works for less than twice as much as the other, everyone would want to hire him and no one would hire the less-productive one. Only when his wage is exactly twice as high, exactly paralleling the difference in productivity, would people be equally willing to hire either. Transaction cost theory

The model shows institutions and market as a possible form of organization to coordinate economic transactions. When the external transaction costs are higher than the internal transaction costs, the company will grow. If the external transaction costs

are lower than the internal transaction costs the company will be downsized by outsourcing, for example. According to Ronald Coase, people begin to organise their production in firms when the transaction cost of coordinating production through the market exchange, given imperfect information, is greater than within the firm. Truncated dependent variable In economics, truncated dependent variables are variables for which observations cannot be made for certain values in some range. Turnpike model of money The turnpike model of money explains valued money as a way to facilitate trade between agents who meet as strangers in spatially separated isolated markets with no communication or transactions between the markets at any time. The turnpike model of money resolves well-known problem that in standard frictionless Arrow-Debreu general equilibrium model money can't facilitate exchange and nonmonetary competitive equilibrium are Pareto optimal. U Unified growth theory Unified growth theory was developed to address the inability of endogenous growth theory to explain key empirical regularities in the growth processes of individual economies and the world economy as a whole. Endogenous growth theory was satisfied with accounting for empirical regularities in the growth process of developed economies over the last hundred years. As a consequence it was not able to explain the qualitatively different empirical regularities that characterized the growth process over longer time horizons in both developed and less developed economies. Unified growth theories are endogenous growth theories that are consistent with the entire process of development, and in particular the transition from the epoch of Malthusian stagnation that had characterized most of the process of development to the contemporary era of sustained economic growth Uppsala mode The Uppsala mode is a theory that explains how firms gradually intensify their activities in foreign markets. It is similar to the POM model The key features of both models are the following: firms first gain experience from the domestic market before they move to

foreign markets; firms start their foreign operations from culturally and/or geographically close countries and move gradually to culturally and geographically more distant countries; firms start their foreign operations by using traditional exports and gradually move to using more intensive and demanding operation modes (sales subsidiaries etc.) both at the company and target country level. Upstream price Upstream price is an economic term that refers to the price of main inputs of production (for processing/manufacturing etc.) or prices quoted on higher market levels (e.g. wholesale markets). Upstream prices are the prices paid by producers (as opposed to consumers), and are directly related to the cost of production. In contrast, downstream prices are the prices paid by consumers at the retail level. The relationship between upstream prices and downstream prices is largely explained by asymmetric price transmission. W Wallerstein The most well-known version of the world-system approach has been developed by Immanuel Wallerstein, who is seen as one of the founders of the intellectual school of world-systems theory. Wallerstein notes that world-systems analysis calls for an unidisciplinary historical social science, and contends that the modern disciplines, products of the 19th century, are deeply flawed because they are not separate logics, as is manifest for example in the de facto overlap of analysis among scholars of the disciplines. Wicksell's theory of capital

Named after Swedish economist Knut Wicksell (1851-1926), Wicksell's theory of capital examines factor prices as derived from the value of the marginal product. Wicksell pointed out that in an equilibrium situation, the interest rate would exceed the value of the marginal product of capital because the aggregate stock of capital would be revalued due to changes in the interest rate. World-systems theory The world-systems theory (also known as the world-systems analysis) is a multidisciplinary, macro-scale approach to world history and social change.

The world-systems theory stresses that world-systems (and not nation states) should be the basic unit of social analysis. World-system refers to the international division of labor, which divides the world into core countries, semi-periphery countries and the periphery countries. Core countries focus on higher skill, capital-intensive production, and the rest of the world focuses on low-skill, labor-intensive production and extraction of raw materials. This constantly reinforces the dominance of the core countries. Nonetheless, the system is dynamic, and individual states can gain or lose the core (semi-periphery, periphery) status over time. For a time, some countries become the world hegemon; throughout last few centuries, this status has passed from the Netherlands, to the United Kingdom and most recently, the United States.