Economic Systems & Knowledge

These flashcards cover the key economic concepts from the lecture, providing definitions and explanations essential for understanding economic systems, fairness, equality, trade, capital, globalization, market structure, and innovation.

Centralized planning

An economic system where decisions about production and resource allocation are made by a central authority or government.

Delay problem

The inefficiency that occurs when decision-making is slowed by bureaucracy or lack of timely information.

Wage suppression

The deliberate or structural limitation of wage growth for workers, often to maintain profits or competitiveness.

Market economy

An economic system where prices and production are determined by supply and demand.

Price system

The mechanism by which the market coordinates production and consumption through price signals.

Artificial need

A consumer desire created or exaggerated by marketing rather than genuine necessity.

Knowledge problem

The difficulty of central authorities obtaining and using all necessary information to make efficient economic decisions.

Arbitrage

The simultaneous buying and selling of assets in different markets to profit from price differences.

Competitive capitalism

A system where private businesses compete freely in markets with minimal government interference.

Scientific knowledge

Systematic, evidence-based understanding of phenomena, distinct from local or practical knowledge.

Artificial scarcity

The deliberate limitation of supply to maintain higher prices or profits.

Property rights

The legal rights to own, use, and transfer resources or goods; essential for trade and investment.

Decentralized knowledge

The idea that useful knowledge is dispersed among individuals, not concentrated in one place.

Trade cycle

The recurring pattern of economic expansion and contraction over time.

Price signal disruption

When market signals (prices) fail to reflect true supply and demand, leading to inefficiency.

Normative stakeholder theory

The ethical view that businesses have obligations to all stakeholders, not just shareholders.

Fairness

The quality of making judgments that are free from discrimination or favoritism.

Option luck

The outcome of deliberate risks taken voluntarily.

Risk-taking

The willingness to engage in actions with uncertain outcomes.

Equity

Fairness in outcomes, often considering differences in needs or circumstances.

Equalizing differences

Wage variations that compensate workers for differing job conditions (e.g., danger, effort).

Predatory phase

A stage where one group or entity exploits another for gain.

Equality

The state of being equal in rights, status, or opportunities.

Personal endowments

The natural abilities or talents a person possesses.

Social beings

The idea that humans are inherently shaped by and dependent on society.

Community principle

The view that decisions and justice should account for community welfare, not just individuals.

Payment for product

The idea that compensation should reflect the value or effort of what one produces.

Myopically self-interested

Focused only on short-term personal gain without considering long-term or collective effects.

Egalitarian principle

The belief that all people deserve equal moral consideration and basic resources.

Inherited wealth

Assets or advantages passed down through family or lineage rather than earned.

Laissez-faire economics

The principle that economies function best with minimal government intervention.

Bourgeoisie (capitalist class)

The class that owns the means of production and profits from capital.

Tariffs

Taxes imposed on imported goods to protect domestic industries or raise revenue.

Division of labor

The specialization of tasks to improve productivity and efficiency.

Proletariat (working class)

The laboring class that sells its work for wages.

Non-tariff barriers

Trade restrictions other than tariffs, such as quotas or regulations.

Invisible hand

The self-regulating nature of the marketplace through individual pursuit of self-interest.

Trade liberalization

The reduction or removal of barriers to international trade.

Extralegal (informal) economies

Economic activity that occurs outside formal legal and regulatory systems.

Comparative advantage

The ability to produce a good at a lower opportunity cost than others.

Protectionism

Economic policies that restrict imports to protect domestic industries.

Dead capital

Assets that cannot be used productively because ownership is not legally recognized.

Interdependence

Mutual reliance among nations or entities through trade and exchange.

Living capital

Human or natural resources that can generate ongoing value or productivity.

Monopoly

A market dominated by a single seller with significant control over prices.

Efficiency

The optimal use of resources to produce maximum output with minimal waste.

Paradox of progress

The idea that technological or economic progress can create new problems even as it solves old ones.

Oligopoly

A market structure dominated by a few large firms.

Consolidation

The process of companies merging or acquiring others to gain market power.

Innovator’s dilemma

When successful firms fail to adopt new innovations that ultimately disrupt them.

Barriers to market entry

Obstacles that make it difficult for new firms to enter a market.

Disruptive innovation

A new product or technology that significantly alters or replaces existing markets.

Benefits of monopolies

Potential advantages such as economies of scale or long-term research investment.

Competition

Rivalry between firms to attract customers and maximize profits.

Creative destruction

The process by which new innovations replace outdated industries or technologies.

Drawbacks of monopolies

Negative effects such as higher prices, lower quality, or reduced innovation.