Posts Tagged ‘economic theory’

Mercantilism is…

Wednesday, July 27th, 2011

Mercantilism is an economic theory that was popular in Europe during the 17th century.

The basic idea is that a country’s power and economic well-being come from having lots of precious metals around, like gold and silver. This leads to arguments against free trade and for protectionist trade policies. By gaining a trade surplus (i.e., exporting more than you’re importing), a country can collect more and more of these metals from other countries buying its goods.

While mercantilism is usually associated with European trade policies of the somewhat distant past, it still pops up in today’s world to describe a country that is acting in mercantilistic ways.

Econometrics is…

Wednesday, July 27th, 2011

Econometrics is the use of mathematics and computing to analyze economic questions. Someone who does econometrics is called an “econometrician.” Yup.

Econometricians use models (like linear regression) to achieve a number of goals. These include:

  • generating economic data
  • answering a particular question
  • testing a theory
  • discovering an economic relationship

A Plutonomy is…

Tuesday, May 24th, 2011

A Plutonomy is an economy that is driven and controlled by an extremely wealthy minority. The word was coined in 2005 by an analyst at Citigroup. According to the laws of Plutonomics, the rich – because they spend a lot of money – make up such a large proportion of national spending that they mess with national spending statistics.

For example, if you asked everyone in the country how much they spend on designer clothes each year, and averaged that number, you would get an inaccurate picture of how well America is dressing. Why? Because one person spending $10,000 a year on couture while 9 other people spend $0 still makes it look like everyone is dropping $1,000 on their “collection” every year.