The hypothesis of financial instability was developed by the economist Hyman Minksy. He argued that financial crisis are endemic in capitalism because periods of economic prosperity encouraged borrowers and lender to be progressively reckless. This excess optimism creates financial bubbles and the later busts. Therefore, capitalism is prone to move from periods of financial stability …
Neoliberalism is a term commonly used to describe free-market economics. Neoliberalism involves policies associated with free trade, privatisation, price deregulation, a reduced size of government and flexible labour markets. Recently, neoliberalism has been associated with the policies of austerity and attempts to reduce budget deficits – usually by cutting government spending on social programmes. Neo-liberalism …
Definition of creative destruction This refers to the process of how capitalism leads to a constantly changing structure of the economy. Old industries and firms, which are no longer profitable, close down enabling the resources (capital and labour) to move into more productive processes. Creative destruction means that the company closures and job losses are good …
The infant industry argument states that developing countries are justified to put tariffs on imports if they are seeking to develop new industries and diversify their economy. In particular, there is a justification for placing tariffs on industries where a country has a latent comparative advantage. This means that if they can develop infrastructure and economies …
A capitalist economic system is one characterised by free markets and the absence of government intervention in the economy. In practice a capitalist economy will need some government intervention, primarily to protect private property. (This is important to distinguish capitalism from anarchism, where there is absolutely no government present) Features of a capitalist economic system …
Readers Question: Does government increases or decrease economic efficiency. Kindly explain as I have tried to look for the reasons. This is an open-ended question, which raises many different issues. To some, on the political right, it is a simple matter of governments bad, markets good. Others are apt to see the government as a …
Due to lack of space in the book, we have published full bibliography on this website. Bibliography Chapter 1 Is it OK to be selfish? Frank, R H (1988) Passions Within Reason: The Strategic Role of the Emotions, p. xi. New York: W W Norton & Co. Galbraith, J K (1982) “Recession economics”, The New …
Laissez-faire economics is defined as a situation with minimal government intervention. Under laissez-faire, governments and regulators ‘leave alone’ private firms to allow them to make decisions about production and output. In particular, laissez-faire involves zero / minimal government intervention on issues such as regulation, taxes and tariffs. Comparison between Laissez-Faire economics and social democracy Origin …