Division of labor combines specialization and the partition of a complex production task into several, or many, sub-tasks. Its importance in economics lies in the fact that a given number of workers can produce far more output using division of labor compared to the same number of workers each working alone. Interestingly, this is true […]
The Library of Economics and Liberty carries the popular Concise Encyclopedia of Economics, edited by David R. Henderson.
This highly acclaimed economics encyclopedia was first published in 1993 under the title The Fortune Encyclopedia of Economics. It features easy-to-read articles by over 150 top economists, including Nobel Prize winners, over 80 biographies of famous economists, and many tables and charts illustrating economics in action. With David R. Henderson’s permission and encouragement, the Econlib edition of this work includes links, additions, and corrections.
Corporations are easier to create than to understand. Because corporations arose as an alternative to partnerships, they can best be understood by comparing these competing organizational structures. The presumption of partnership is that the investors will directly manage their own money rather than entrusting that task to others. Partners are “mutual agents,” meaning that each […]
Adam Smith struggled with what came to be called the paradox of “value in use” versus “value in exchange.” Water is necessary to existence and of enormous value in use; diamonds are frivolous and clearly not essential. But the price of diamonds—their value in exchange—is far higher than that of water. What perplexed Smith is […]
Many people believe that employers do not care about workplace safety. If the government were not regulating job safety, they contend, workplaces would be unsafe. In fact, employers have many incentives to make workplaces safe. Since the time of Adam Smith, economists have observed that workers demand “compensating differentials” (i.e., wage premiums) for the risks […]
The price of a share of stock, like that of any other financial asset, equals the present value of the sum of the expected dividends or other cash payments to the shareholders, where future payments are discounted by the interest rate and risks involved. Most of the cash payments to stockholders arise from dividends, which […]
As the category\'s name suggests, entries in this category are on important historical developments, two of the main ones being the Industrial Revolution and the Great Depression.
With the decline in transportation costs, especially across oceans, and the recent increase in trade barriers, topics in international trade has become even more important.
Sometimes defined as the theory of the economy as a whole, macroeconomics includes issues such as economic growth, fiscal policy, monetary policy, national income accounts, and unemployment.
With extensive government regulation of many industries, there are many entries on aspects of that regulation, in industries ranging from agriculture, airlines, and energy tp trucking and pharmaceuticals.
Myron Scholes, along with robert merton, was awarded the 1997 Nobel Prize in economics “for a new method to determine the value of derivatives.” The particular derivative they studied was stock options (see futures and options markets). A call option gives its owner the right to buy a stock at a particular price, called […]
British economist Jeremy Bentham is most often associated with his theory of utilitarianism, the idea that all social actions should be evaluated by the axiom “It is the greatest happiness of the greatest number that is the measure of right and wrong.” Counter to Adam Smith’s vision of “natural rights,” Bentham believed that there […]