Political Economy Definitions of the Dictionary

Approximately 200 clear, concise definitions with aditional information that cover political economy law topics from A to Z. It is a quick reference help for attorneys, lawyers, legal professionals, law students, economists and the general public.

The Dictionary

ABSOLUTE ADVANTAGE (definition of the Legal Dictionary)
The ability of an economic actor (an individual, a household or a firm) to produce some particular good or service with a smaller total input of economic resources (labor, capital, land, etc.) per unit of output than other economic actors. In analyzing the theory of trade and economic specialization, it is important to distinguish absolute from comparative advantage, since it is comparative advantage that determines the potential welfare gains from specialization and trade, and not absolute advantage. See also: comparative advantage
ACQUITTAL (definition of the Legal Dictionary)
The judgement of a court that a person charged with a crime has not been proved to be guilty. See also: conviction
AGENCY PROBLEM (definition of the Legal Dictionary)
Also sometimes referred to as the principal-agent problem. The difficult but extremely important and recurrent organizational design problem of how organizations can structure incentives so that people (“agents”) who are placed in control over resources that are not their own with a contractual obligation to use these resources in the interests of some other person or group of people actually will perform this obligation as promised — instead of using their delegated authority over other people’s…
AGGREGATE DEMAND (definition of the Legal Dictionary)
Also more accurately referred to as aggregate expenditure, this is one of the key concepts introduced by John Maynard Keynes that still today is at the heart of most macroeconomic theories about the determination of the overall level of employment (and thus the level of national income produced) in a country’s economy during a given year. Although there have turned out to be a number of logical problems and ambiguities in making the analogy work, Keynes’s original basic notion was that “aggregate…
AGGREGATE SUPPLY (definition of the Legal Dictionary)
Another of the concepts introduced by John Maynard Keynes that still today are used in macroeconomic theories about the determination of the overall level of employment and national income. Like his concept of aggregate demand, the basic notion of aggregate supply was created by analogy to a microeconomic concept originally applying only to an analysis of the market for a single product — in this case, the concept of a supply schedule. Thus, Keynes reasoned, just as the microeconomic theorist…
ALLOCATION (definition of the Legal Dictionary)
The division of things into shares or portions. In economics, the term refers primarily to the “allocation of resources,” the process by which economic resources get allotted (apportioned, assigned) to their particular uses for directly or indirectly satisfying human wants. The allocation process in a particular society’s economy is the process by which the three fundamental economic questions get answered in that society: What goods and services are produced (and in what quantities)?…
ANARCHISM (definition of the Legal Dictionary)
Any of a variety of ideologies sharing the fundamental belief that the state and all similar forms of governmental authority are unjustified and oppressive and illegitimate and therefore ought to be abolished, with future social and economic cooperation to be carried out only by means of voluntary relationships and consensual agreements under conditions of perfect legal equality. See also: state, legitimacy, ideology, socialism
APPROPRIATION BILL (definition of the Legal Dictionary)
A (proposed) formal action by a legislative assembly (such as the U.S. Congress or a state legislature) that specifies exact amounts of the government’s money that the Treasury may legally pay out (through new hiring, contracts for purchases, findings of individuals’ eligibility for income transfer payments, etc.) for each of a list of particular pre-authorized programs carried out by governmental agencies over a specific period of time (normally one year). See also: authorization bill
ARISTOCRACY (definition of the Legal Dictionary)
A privileged social class whose members possess disproportionately large shares of a society’s wealth, social prestige, educational attainment and political influence, with these advantages having been acquired principally through gift or inheritance from a long line of similarly privileged and cultivated ancestors. The term refers also to a form of government in which the state is effectively controlled by the members of such a class. The term tends to have a somewhat unsavory or derogatory connotation…
AUTHORIZATION BILL (definition of the Legal Dictionary)
A (proposed) formal act (or “law”) of a legislative body (such as the U.S. Congress or a state legislature) that legally establishes a new government agency or program or else renews or extends an existing agency or program whose previous legal authorization to exist would otherwise expire with the passage of time. Authorizations may be for one year or more than one year — about one-half of current Federal spending is by agencies or programs subject to annual re-authorization, while the other…
AUTOCRACY (definition of the Legal Dictionary)
A system of government in which supreme political power to direct all the activities of the state is concentrated in the hands of one person, whose decisions are subject to neither external legal restraints nor regularized mechanisms of popular control (except perhaps for the implicit threat of coup d’etat or mass insurrection). See also: dictatorship, totalitarianism, fascism
BANKING (definition of the Legal Dictionary)
In the broadest sense of the term, “banking” is the business of accepting temporary responsibility for safeguarding other people’s money (“deposits”) and then lending out these funds (along with the bankers’ own funds) in order to earn interest for the bank’s own account. Banking firms thus earn their profits primarily by serving as “financial intermediaries” who mobilize the scattered savings of many households and firms (by offering safekeeping services and paying interest on at least…
BARRIERS TO ENTRY (definition of the Legal Dictionary)
Conditions or circumstances that make it very difficult or unacceptably costly for outside firms to enter a particular market to compete with the established firm or firms that are already selling the good or service involved. These barriers may derive from several causes. Legal or regulatory or other clearly political barriers to entry are historically the most common source of long-lived monopolistic or cartelized conditions in the marketplace, either through overt grants of monopoly to politically…
BARTER (definition of the Legal Dictionary)
Trading of goods or services directly for other goods or services, without using money or any other similar unit of account or medium of exchange. Although barter represents the earliest form of trade discovered by primitive man that made possible a more extensive division of labor beyond the limited bounds of a family or small clan grouping, it quickly encounters some practical limits to its efficiency as the division of labor becomes still more extensive and more specialized. Bartering requires…
BILL, APPROPRIATION (definition of the Legal Dictionary)
A (proposed) formal action by a legislative assembly (such as the U.S. Congress or a state legislature) that specifies exact amounts of the government’s money that the Treasury may legally pay out (through new hiring, contracts for purchases, findings of individuals’ eligibility for income transfer payments, etc.) for each of a list of particular pre-authorized programs carried out by governmental agencies over a specific period of time (normally one year). See also: authorization bill
BILL, AUTHORIZATION (definition of the Legal Dictionary)
A (proposed) formal act (or “law”) of a legislative body (such as the U.S. Congress or a state legislature) that legally establishes a new government agency or program or else renews or extends an existing agency or program whose previous legal authorization to exist would otherwise expire with the passage of time. Authorizations may be for one year or more than one year — about one-half of current Federal spending is by agencies or programs subject to annual re-authorization, while the other…
BLACK MARKET (definition of the Legal Dictionary)
A market in which certain goods or services are routinely traded in a manner contrary to the laws or regulations of the government in power. Typical reasons why the market goes underground in this way include the desire by substantial numbers of buyers and sellers to evade restrictive government price controls or inconvenient rationing schemes, to avoid paying heavy taxes on the good or service in question, or simply to be able to obtain forbidden goods or services that the government does not want…
BUDGET (definition of the Legal Dictionary)
A statement of a government’s planned or expected financial position for a specified period of time (usually one year) based on estimates of the expenditures to be made by the government’s main subdivisions (wages and salaries of government employees; consultants’ fees; purchases of equipment, supplies, real estate, etc.; money transferred to beneficiaries of various programs, and so on) during the specified period, along with estimates of the revenues to be realized from the various sources of…
BUDGET DEFICIT (definition of the Legal Dictionary)
The amount by which total government spending is more than government income during a specified period; the amount of money which the government has to raise by borrowing or currency emission in order to make up for the shortfall in tax revenues. See also: budget, budget surplus, national debt, fiscal policy
BUDGET SURPLUS (definition of the Legal Dictionary)
The amount by which government revenues are more than government spending during a specified period. See also: budget, budget deficit, national debt, tax, fiscal policy
BUREAUCRACY (definition of the Legal Dictionary)
In ordinary usage, “bureaucracy” refers to a complex, specialized organization (especially a governmental organization) composed of non-elected, highly trained professional administrators and clerks hired on a full-time basis to perform administrative services and tasks. Bureaucratic organizations are broken up into specialized departments or ministries, to each of which is assigned responsibility for pursuing a limited number of the government’s many official goals and policies — those falling…
BUREAUCRATIC POLITICS (definition of the Legal Dictionary)
Bureaucratic politics theories or explanations of why particular public policy decisions got made the way they did stress the motivation by the relevant officials in the government bureaucracy to protect or promote their own agency’s special interests (in competition with other agencies) as a major motivating factor in shaping the timing and the content of government decisions. Each bureau (or other governmental sub-division) continually strives to maximize its budget and its authorized manpower,…
BUSINESS CYCLE (definition of the Legal Dictionary)
More or less regular swings or wave-like fluctuations in the pace of a country’s economic growth, well above and well below the long-term trend in the growth rate of total production; the ups and downs of overall business activity, as evidenced by surges and declines in GNP and GDP, unemployment rates, and the general price level; the boom-and-bust pattern of recession (or depression) and recovery. In older economic literature (and still today in British usage) the term “trade cycle” is often…
CABINET (definition of the Legal Dictionary)
A select group of state officials who each head one or more of the principal bureaucratic departments or agencies of the executive branch of government and who meet as a group from time to time for the purpose of discussing current policy proposals and advising the chief executive of their recommendations. (Chief executives usually also maintain one or more additional advisory councils that may well be more influential than the more formal cabinet.) [See also: bureaucracy, bureaucratic politics]
CAPITAL (definition of the Legal Dictionary)
The existing stock of goods which are to be used in the production of other goods or services and which have themselves been produced by previous human activities. Capital is conventionally subdivided into “fixed capital” and “circulating capital,” although the distinction is mainly a matter of degree of durability rather than a clear-cut difference in kind. Fixed capital refers to durable producers’ goods such as buildings, plant and machinery, while circulating capital refers to stockpiles of…
CAPITALISM (definition of the Legal Dictionary)
A form of economic order characterized by private ownership of the means of production and the freedom of private owners to use, buy and sell their property or services on the market at voluntarily agreed prices and terms, with only minimal interference with such transactions by the state or other authoritative third parties. [See also: market, market economy, communism]
CAPTURED AGENCY (definition of the Legal Dictionary)
A government agency, especially a regulatory agency, that is largely under the influence of the economic interest group(s) most directly and massively affected by its decisions and policies — typically business firms (and sometimes professional associations, labor unions, or other special interest groups) from the industry or economic sector being regulated. A captured agency shapes its regulations and policies primarily to benefit these favored client groups at the expense of less organized and…
CARTEL (definition of the Legal Dictionary)
A formal organization set up by a group of firms that produce and sell the same product for the purpose of exacting and sharing monopolistic rents. The intended purpose of a cartel is to reap monopoly profits by artificially restricting output and thus driving the price above the level that would prevail if they remained in competition with one another. This they normally accomplish by agreeing on a relatively high common asking price for their product that none of the member firms will be permitted…
CETERIS PARIBUS (definition of the Legal Dictionary)
Latin expression for “other things being equal.” The term is used in economic analysis when the analyst wants to focus on explaining the effect of changes in one (independent) variable on changes in another (dependent) variable without having to worry about the possible offsetting effects of still other independent variables on the dependent variable under examination. For example, “an increase in the price of beef will result, ceteris paribus, in less beef being sold to consumers.” [Putting aside…
CHECKS AND BALANCES (definition of the Legal Dictionary)
A fundamental principle undergirding the design of American government is that of the separation of powers, which prescribes the parcelling out of the various powers and functions of government to separate and relatively independent levels and branches of the federal system in order to prevent their all being controlled at the same time by any potentially tyrannical political faction. But, to the way of thinking of the Framers of the Constitution, the long-term survival of free popular government…
CIVIL RIGHTS/CIVIL LIBERTIES (definition of the Legal Dictionary)
The rights of every citizen to freedom of thought, freedom of conscience, freedom of expression, freedom of movement, freedom to enjoy privacy and autonomy in the management of one’s personal affairs, freedom of private individuals to associate voluntarily and to form organizations for pursuing common purposes, and freedom to participate politically in ways that do not infringe upon the similar rights of others. Although the two terms overlap considerably in ordinary usage (and are often difficult…
COMMERCE CLAUSE (definition of the Legal Dictionary)
The provision of the U.S. Constitution (Article I, Section 8, paragraph 3) that gives Congress the authority to regulate trade with foreign nations and among the states.
COMMON LAW (definition of the Legal Dictionary)
Legally binding rules or principles of justice developed in the course of history from the gradual accumulation of rulings by judges in individual cases, as differentiated from the kind of statute law embodied in special legal codes or statutes enacted by legislative assemblies or imposed by executive decrees. The importance of the common law heritage is particularly great in the legal systems of Great Britain and of most former British colonies, including the U.S. [See also: tort, contract, property rights]
COMMUNISM (definition of the Legal Dictionary)
Any ideology based on the communal ownership of all property and a classless social structure, with economic production and distribution to be directed and regulated by means of an authoritative economic plan that supposedly embodies the interests of the community as a whole. Karl Marx is today the most famous early theoretician of communism, but he did not invent the term or the basic social ideals, which he mostly borrowed and adapted from the less systematic theories of earlier French utopian…
COMPARATIVE ADVANTAGE (definition of the Legal Dictionary)
The ability of one economic actor (an individual, a household, a firm, a country, etc.) to produce some particular good or service at a lower opportunity cost than other economic actors can. That is, the economic actor with a comparative advantage can produce the particular good or service by giving up less value in other goods or services that he could otherwise produce with his labor and resources than the other economic actors would have to give up in producing that same good or service. This…
COMPETITION (definition of the Legal Dictionary)
Competition is one of the most important concepts in economics, yet when examined closely, it turns out to be one of the most elusive concepts to nail down in practice. A market in some particular good or service is said by economists to be “competitive” if a substantial number of buyers and sellers trade in the good or service independently and thus no single buyer or seller is so “weighty” in the marketplace as to significantly influence the going price of the good or service by his/her individual…
COMPLEMENTARY GOODS (definition of the Legal Dictionary)
Two products for which the demand schedules are related to each other so that an increase in the price of the first good will cause a leftward shift of the entire demand schedule for the other good(s) — that is, less of the second good will now be demanded at any given available price of the second good. (By the same token, a decrease in the price of the first good will result in a rightward shift of the entire demand schedule for the other good(s), so that more of the second good will now be demanded…
CONFEDERATION (definition of the Legal Dictionary)
A form of government in which the major geographical subdivisions of the country have their own governmental organizations that retain numerous independent rights of policy-making and decision that may not be overridden by the central government, and in which the central government’s rights of policy-making and decision are severely restricted. The distinction between a federation and a confederation is not always easy to make, but generally speaking, confederations assign much more limited powers…
CONSERVATISM (definition of the Legal Dictionary)
A general preference for the existing order of society and an opposition to all efforts to bring about rapid or fundamental change in that order. Conservative ideologies characteristically strive to show that existing economic and political inequalities are well justified and that the existing order is about as close as is practically attainable to an ideal order. Conservative ideologies most often base their claims on the teachings of religion and traditional morality and tend to downplay the reliability…
CONSTITUENT (definition of the Legal Dictionary)
A person who is represented politically by a designated government official or officeholder, especially when the official is one that the person represented has the opportunity to participate in selecting through voting or perhaps through other methods of indicating political confidence and support. A Senator’s constituency consists of the citizenry who reside within his or her state. The constituency of a Member of the House of Representatives consists of the people who live in his or her district….
CONTRACT (definition of the Legal Dictionary)
A legally binding agreement between two or more competent parties fixing the precise terms and details for a voluntary exchange of goods or services over which the contracting parties possess property rights. An agreement is a legally enforceable contract if and only if: The agreement must be “mutual” (all parties have the same understanding of the meaning of their agreement — there is a “meeting of the minds”); The agreement must be “voluntary” (none of the parties is agreeing…
CONVICTION (definition of the Legal Dictionary)
The judgement of a court that a person charged with a crime is guilty. [See also: acquittal]
CORPORATION (definition of the Legal Dictionary)
Also referred to as limited liability corporation. A type of legal entity provided for in the laws of most modern economically developed countries that two or more investors may agree to create for the purpose of combining some of their resources and going into business together. Corporations have the status of “artificial legal persons” and thus may own property, make contracts, be held responsible for committing crimes or torts, initiate court actions such as lawsuits, and so on. In the United…
COST (definition of the Legal Dictionary)
In the widest sense, the measure of the value of what has to be given up in order to achieve a particular objective. In everyday language, people most often use the term rather like an accountant does, as synonymous with the total money outlays actually paid out to achieve the objective, but this is not precisely what economists mean by the term. Economists are concerned with rational decision-making, and the rational decision-maker needs to estimate in advance the full range of consequences of…
COUP D’ETAT (definition of the Legal Dictionary)
A quick and decisive extra-legal seizure of governmental power by a relatively small but highly organized group of political or military leaders, typically by means of the unexpected arrest or assassination of the incumbent chief executive and his principal supporters within the government. For the coup to be successful, the rank and file of the police and military have to be willing to take orders from the new government leaders once the coup is accomplished, so typically the organizers of successful…
DEFICIT, BUDGET (definition of the Legal Dictionary)
The amount by which total government spending is more than government income during a specified period; the amount of money which the government has to raise by borrowing or currency emission in order to make up for the shortfall in tax revenues. See also: budget, budget surplus, national debt, fiscal policy
DEFLATION (definition of the Legal Dictionary)
The opposite of inflation — that is, a sustained fall over time in the general level of prices, normally measured by the annual percentage increases or decreases of a weighted index of prices of some large and representative sample of goods and services (both consumers’ goods and producers’ goods) regularly traded in the particular economy under consideration. Just as very large scale inflations are normally the result of large percentage increases in the money stock, large-scale deflations are normally the consequence of substantial reductions in the available money stock. [See also: inflation]
DEMAND (definition of the Legal Dictionary)
The willingness and ability of the people within a market area to purchase particular amounts of a good or service at a variety of alternative prices during a specified time period. [See also: law of demand, demand curve, demand schedule, supply]
DEMAND CURVE (definition of the Legal Dictionary)
A graphical representation of a demand schedule. Conventionally, the demand curve is usually drawn between axes with price plotted along the vertical axis and number of units of the good or service demanded plotted along the horizontal axis. Where the law of demand applies to the particular market under consideration, the demand curve will slope (either gently or steeply) downwards from left to right. [See also: demand, law of demand, demand schedule, supply]
DEMAND SCHEDULE (definition of the Legal Dictionary)
A table or listing showing the number of units of a single type of good (or service) that potential purchasers would offer to buy at each of a number of varying prices during some particular time period. Demand schedules may be drawn up to reflect the behavioral propensities of a single unique individual, household, or firm — or, more frequently encountered in microeconomic analysis, composite demand schedules for the particular good may be derived by adding up all the demand schedules of the large…
DEMAND, LAW OF (definition of the Legal Dictionary)
Other things being held constant, the lower the price of a good (or service), the greater the quantity of it that will be demanded by purchasers at any given time. [See also: demand curve, demand schedule, demand, law of supply]
DEMERIT GOOD (definition of the Legal Dictionary)
Sometimes also referred to by the term “merit bad.” A good or service available for purchase on the market that some “outside analyst” regards as intrinsically unhealthy, degrading, or socially damaging for other people to consume, regardless of the consumers’ own desires, preferences and values. Examples of commodities often treated as demerit goods include tobacco, alcohol and other psychoactive recreational drugs; gambling devices; culturally taboo food products; sexually explicit art and literature;…
DEMOCRACY (definition of the Legal Dictionary)
A system of government in which effective political power is vested in the people. In older usage (for example, in the writings of the classical Greek and Roman philosophers or in the Federalist Papers), the term was reserved exclusively for governmental systems in which the populace exercised this power directly through general assemblies or referenda to decide the most important questions of law or policy. In more contemporary usage, the term has been broadened to include also what the American…
DEPRESSION (definition of the Legal Dictionary)
A cyclical period of serious decline in the national economy, characterized by temporarily decreased levels of business activity across most economic sectors, and consequently by decline in Gross Domestic Product, relatively higher levels of unemployment, rising numbers of business bankruptcies and (at least in the most severe instances) a falling general price level (deflation). A general business slump of somewhat less severity and shorter duration is typically referred to as a recession. There…
DERIVED DEMAND (definition of the Legal Dictionary)
The demand for each of the factors of production is often referred to as a “derived” demand to emphasize the fact that the relationship between the factor’s price and the quantity of the factor demanded by firms employing it in production is directly dependent on consumer demand for the final product(s) the factor is used to produce. If for some reason (say, for example, a spontaneous shift in consumer tastes) the demand for men’s hats increases (shifts to the right) so that more hats than before…
DICTATORSHIP (definition of the Legal Dictionary)
Government by a single person (or group) whose discretion in using the powers and resources of the state is unrestrained by any fixed legal or constitutional rules and who is (are) in no effective way held responsible to the general population or their elected representatives. [See also: republic, autocracy, oligarchy, aristocracy, monarchy, state, democracy, theocracy]
DIMINISHING RETURNS, LAW OF (definition of the Legal Dictionary)
Sometimes also referred to as the law of variable proportions, this “law” is really a generalization economists make about the nature of technology when it is possible to combine the same factors of production in a number of different proportions to make the same product. The law states: When increasing amounts of one factor of production are employed in production along with a fixed amount of some other production factor, after some point, the resulting increases in output of product become…
DISCOUNT RATE (definition of the Legal Dictionary)
The interest rate that banks pay on loans made to them from the Federal Reserve. Banks whose reserves dip below the reserve requirement set by the Federal Reserve’s Board of Governors must take immediate action to make good their shortfall. The Federal Reserve is normally willing to make a short-term loan of reserves to a bank in this situation to give the bank a brief period of time to make adjustments in its loan and investment portfolio that will permit it to raise its reserves or lower its loans…
DIVISION OF LABOR (definition of the Legal Dictionary)
The division of a complex production process into a number of simpler tasks, each one of which is undertaken by a different individual who typically (but not necessarily) specializes in one task (or a very few tasks) on a more or less permanent basis. The advantages of division of labor for enhancing human productivity were first extensively analyzed by Adam Smith in his 1776 classic The Wealth of Nations, where he coined the phrase. Whereas Smith’s famous analysis of the pin factory emphasized…
ECONOMICS (definition of the Legal Dictionary)
The branch of the social sciences concerned primarily with analyzing and explaining human behavior in making decisions about the allocation of scarce resources. Economists study the complex ways in which the following are determined within a society: What goods and services are to be produced (and in what amounts)? By what means are these goods and services to be produced (using what combinations of the various substitutable factors of production)? How are the goods and services…
EFFICIENCY (definition of the Legal Dictionary)
In an economic sense, the ratio or proportionality between the value of the human end achieved (“benefits” or “satisfactions”) and the value of the scarce resources expended to achieve it (opportunity costs). When an economist calls a situation or a practice “inefficient,” he is claiming that we could achieve exactly the same desired goals with the expenditure of fewer scarce resources, or, put another way, that the amount of resources being employed could potentially produce even more of the beneficial…
EGALITARIANISM (definition of the Legal Dictionary)
A social philosophy or ideology placing primary stress on the value of human equality and advocating radical social reforms so as to eliminate all forms of economic, social and political inequality. [See also: anarchism, socialism, communism]
ELASTICITY (definition of the Legal Dictionary)
A measure of the degree of responsiveness of one variable to changes in another. For example, the price elasticity of demand for a particular good is the relative degree of responsiveness of the quantity demanded to relatively small changes in its price. On a supply-demand graph drawn as normally presented in textbooks, elasticity of demand can be very roughly assessed simply by eyeballing the steepness of the slope of the demand curve: a very steeply sloping demand curve (that is, almost straight…
ELITE (ELITIST) THEORY (definition of the Legal Dictionary)
The theoretical view held by many social scientists which holds that American politics is best understood through the generalization that nearly all political power is held by a relatively small and wealthy group of people sharing similar values and interests and mostly coming from relatively similar privileged backgrounds. Most of the top leaders in all or nearly all key sectors of society are seen as recruited from this same social group, and elite theorists emphasize the degree to which interlocking…
EMPIRE (definition of the Legal Dictionary)
A form of conglomerate state encompassing a geographical area or set of areas containing diverse peoples or ethnic groups and ruled by a single central government authority that is primarily identified with one dominant people or ethnic group. The empire thus consists of an imperial center and one or more colonies or other dependent subunits (provinces, protectorates, etc.) whose governments are subordinate to that of the imperial center. Historically, empires have usually first emerged either as…
ENTITLEMENT PROGRAM (definition of the Legal Dictionary)
The kind of government program that provides individuals with personal financial benefits (or sometimes special government-provided goods or services) to which an indefinite (but usually rather large) number of potential beneficiaries have a legal right (enforceable in court, if necessary) whenever they meet eligibility conditions that are specified by the standing law that authorizes the program. The beneficiaries of entitlement programs are normally individual citizens or residents, but sometimes…
ENTREPRENEUR, ENTREPRENEURSHIP (definition of the Legal Dictionary)
French term (taken over into English) for “enterpriser” or “one who undertakes.” An entrepreneur is a person who detects a previously untapped opportunity to make substantial profits (either by lowering the costs of producing existing good/services or by creating brand new ways for people to satisfy their wants through new products) — and then takes the initiative in bringing together the necessary factors of production to exploit this opportunity, typically by organizing a new business firm (or…
EXTERNALITY (definition of the Legal Dictionary)
A situation in which the private costs or benefits to the producers or purchasers of a good or service differs from the total social costs or benefits entailed in its production and consumption. An externality exists whenever one individual’s actions affect the well-being of another individual — whether for the better or for the worse — in ways that need not be paid for according to the existing definition of property rights in the society. An “external diseconomy,” “external cost” or “negative…
FACTION (definition of the Legal Dictionary)
A somewhat derogatory term for a group of people banded together to seek some self-serving or “selfish” goal through the political process, with the implication being that they usually hope to do this by riding rough-shod over the rights or legitimate interests of many of their fellow citizens. [See also: interest group, political party, rent-seeking behavior]
FACTORS OF PRODUCTION (definition of the Legal Dictionary)
The scarce resources that are useful not so much for direct and immediate satisfaction of human wants as for producing other goods or services. Economists often find it useful for purposes of theoretical simplification to group the millions of different sorts of factors of production into several very broad categories and then discuss them as though all the items within each category were perfectly substitutable for each other and therefore traded on a single market. The simplest such conventional…
FASCISM (definition of the Legal Dictionary)
A class of political ideologies (and historical political regimes) that takes its name from the movement led by Benito Mussolini that took power in Italy in 1922. Mussolini’s ideas and practices directly and indirectly influenced political movements in Germany (especially the Nazi Party), Spain (Franco’s Falange Party), France, Argentina, and many other European and non-European countries right up to the present day. The different “fascist” movements and regimes have varied considerably in their…
FEDERAL RESERVE SYSTEM (definition of the Legal Dictionary)
The central bank for the United States banking system and the institution that holds the primary responsibility for the making and execution of American monetary policies. Its bank notes circulate today as the United States’ everyday paper currency. (Metal coins, however, are issued by the United States Treasury Department, not by the Federal Reserve.) The Federal Reserve System represents an almost unique hybrid or blending of elements of governmental power with elements of private ownership…
FEDERATION (definition of the Legal Dictionary)
A composite or conglomerate state that consists of several regional governments with a common central government, and in which both regional and central governments each have their own spheres of policy making in which their decisions are normally presumed to be final. The powers of the regional and central governments are almost invariably spelled out in detail in a written constitution, which also normally specifies procedures to be followed for resolving conflicts between the two kinds of government…
FISCAL POLICY (definition of the Legal Dictionary)
That part of government policy which is concerned with raising revenue through taxation and with deciding on the amounts and purposes of government spending. Keynesian economic theorists believe that government can, and should, regulate the overall pace of activity in the national economy through fiscal policy, principally by deliberately having government borrow to spend more than it takes in (running a budget deficit) to increase total demand for goods and services in times of high unemployment…
FREE RIDER (definition of the Legal Dictionary)
A person who chooses to receive the benefits of a “public good” or a “positive externality” without contributing to paying the costs of producing those benefits. [See also: public goods, externality]
FREE TRADE (definition of the Legal Dictionary)
A legal arrangement or national policy under which the exchange of goods and services across international borders is neither restricted nor subsidized by techniques of government intervention such as import tariffs, import quotas, export subsidies, discriminatory regulations disadvantaging foreign buyers or foreign sellers, trade embargoes, political manipulation of foreign currency exchange rates, and the like. From their first origins in the writings of Adam Smith up to the present, the classical…
GROSS DOMESTIC PRODUCT (GDP) (definition of the Legal Dictionary)
An estimate of the total money value of all the final goods and services produced in a given one-year period using the factors of production located within a particular country’s borders. [See also: Gross National Product (GNP)]
GROSS NATIONAL PRODUCT (GNP) (definition of the Legal Dictionary)
An estimate of the total money value of all the final goods and services produced in a given one-year period by the factors of production owned by a particular country’s residents. (“Final” goods and services means goods and services sold or otherwise provided to their final consumers — that is, to avoid double counting, the value of steel sold to GM to make a car is not added separately into the GNP or GDP totals because its value is already included when we add in the final sales price of the…
GROWTH THEORY (definition of the Legal Dictionary)
The part of economic theory that seeks to explain (and hopes to predict) the rate at which a country’s economy will grow over time. Economic growth is usually measured as the annual percentage rate of growth in one or another of the country’s major national income accounting aggregates, such as Gross National Product or Gross Domestic Product (almost always with appropriate statistical adjustments to discount the potentially misleading effects of price inflation). Just about any country’s economy…
HUMAN CAPITAL (definition of the Legal Dictionary)
A loose catch-all term for the practical knowledge, acquired skills and learned abilities of an individual that make him or her potentially productive and thus equip him or her to earn income in exchange for labor. The figurative use of the term capital in connection with what would perhaps better be called the “quality of labor” is somewhat confusing. In the strictest sense of the term, human capital is not really capital at all. The term was coined so as to make a useful illustrative analogy between…
HYPERINFLATION (definition of the Legal Dictionary)
Extremely rapid or “run-away” inflation. The precise boundary line between “ordinary” inflation and hyperinflation is somewhat arbitrary, but contemporary economists generally reserve the term hyperinflation for situations in which the general price level is increasing at rates in excess of 50% per month. [See also: inflation]
IDEOLOGY (definition of the Legal Dictionary)
A comprehensive and coherent set of basic beliefs about political, economic, social and cultural affairs that is held in common by a sizable group of people within a society. Such interrelated ideas and teachings purport both to explain how political, economic, social and cultural institutions really do work and also to prescribe how such institutions ought ideally to operate. Conservative ideologies seek to demonstrate a close correspondence between “the way things are” and “the way things ought…
IMPOUNDMENT (definition of the Legal Dictionary)
A traditional budgeting procedure by which the President of the United States once could prevent any agency of the Executive Branch from spending part or all of the money previously appropriated by Congress for their use. He would accomplish this, in essence, by an executive order that would forbid the Treasury to transfer the money in question to the agency’s account. (The Constitution provides that no money from the Treasury can be spent without a specific Congressional appropriation, but it is…
INCENTIVE (definition of the Legal Dictionary)
Something that provides a motive for a person to choose a particular course of action. Organized cooperative activities in a social setting — such as cooperation for the purpose of economic production — depends upon each of the participants having some sort of incentive to behave in the required cooperative fashion. Different societies (and even different organizations within the same society) vary considerably in the nature of the incentive systems upon which they characteristically rely to organize…
INCREMENTALISM (INCREMENTALIST DECISION-MAKING) (definition of the Legal Dictionary)
Because an exhaustive analysis of the costs and benefits of every conceivable option for dealing with a problem in public policy is often unduly time-consuming and expensive, large organizations (and often individuals) may resort to a practical shortcut in deciding on possible improvements of existing programs. Only a few of the many possible options are seriously examined, and these tend to be ones that involve only small changes in existing policies or procedures rather than radical innovations….
INCUMBENT (definition of the Legal Dictionary)
A current office-holder.
INFLATION (definition of the Legal Dictionary)
In contemporary usage, a sustained rise over time in the general level of prices, normally measured by a weighted index of prices of a large and representative sample of goods and services (both consumers’ goods and producers’ goods) regularly traded in the economy under consideration. (In 19th century usage, the term referred more specifically to any sustained expansion in the stock of money available within the economy under consideration — the eventual consequence of which would normally be…
INTEREST GROUP (definition of the Legal Dictionary)
A group of people who share common traits, attitudes, beliefs, and/or objectives who have formed a formal organization to serve specific common interests of the membership. Examples of interest groups would include such disparate organizations as the Auburn Chamber of Commerce, the Society for the Prevention of Cruelty to Animals, the elementary school P.T.A., the Teamsters Union, the Southern Baptist Convention, the American Numismatics Association, the National Association for the Advancement…
INTEREST RATE(S) (definition of the Legal Dictionary)
The price(s) of obtaining the temporary use of money that one borrows from someone else who actually owns it, normally expressed as a percentage of the amount borrowed per year. Since loans and loan repayment extend over considerable periods of time and entail more complex security arrangements than a simple cash-on-the-barrelhead exchange, interest rates to be paid are normally spelled out as part of a relatively complex written contract between borrower and lender. Like most other prices in an…
INVESTMENT (definition of the Legal Dictionary)
All income expended by firms or government agencies on capital goods for use in their productive activities. Thus aggregate investment in a national economy is the total amount of spending in order to maintain or increase the stock of physical goods not intended for immediate consumption by the purchasing entity but rather for use in producing other kinds of goods or services to be delivered to others. (Note that the economist’s sense of the term is somewhat narrower than the general population’s…
IRON TRIANGLES (definition of the Legal Dictionary)
The closed, mutually supportive relationships that often prevail in the United States between the government agencies, the special interest lobbying organizations, and the legislative committees or subcommittees with jurisdiction over a particular functional area of government policy. As long as they hang together, the members of these small groups of movers and shakers tend to dominate all policy-making in their respective specialized areas of concern, and they tend to present a united front against…
JUDICIAL ACTIVISM (definition of the Legal Dictionary)
The view that the Supreme Court justices (and even other lower-ranking judges as well) can and should creatively (re)interpret the texts of the Constitution and the laws in order to serve the judges’ own considered estimates of the vital needs of contemporary society when the elected “political” branches of the Federal government and/or the various state governments seem to them to be failing to meet these needs. On such a view, judges should not hesitate to go beyond their traditional role as interpreters…
JUDICIAL RESTRAINT (definition of the Legal Dictionary)
The view that the Supreme Court (and other lesser courts) should not read the judges’ own philosophies or policy preferences into the constitution and laws and should whenever reasonably possible construe the law so as to avoid second guessing the policy decisions made by other governmental institutions such as Congress, the President and state governments within their constitutional spheres of authority. On such a view, judges have no popular mandate to act as policy makers and should defer to…
JUDICIAL REVIEW (definition of the Legal Dictionary)
The power of the federal courts to overturn or limit the enforcement of Federal or state laws or regulations that the judges determine have violated the Federal constitution. The term also covers the power of the Federal courts to overturn or limit the enforcement of state laws or regulations that the judges determine are in direct conflict with Federal laws or regulations regarding a specific subject matter where the Federal constitution gives primary jurisdiction to the Federal government. Also…
LABOR (definition of the Legal Dictionary)
The collective or generic name given to all the various productive services provided by human beings, including physical effort, skills, intellectual abilities and applied knowledge. Although a market society with a complex division of labor involves hundreds or even many thousands of discrete types of labor differentiated according to the kinds of skills and abilities required (each with their own separate but interconnected labor markets), economists often find it useful for theorizing to simplify…
LAISSEZ-FAIRE (definition of the Legal Dictionary)
Literally, French for “Let do.” The classical liberal (and modern libertarian) doctrine that the economic affairs of society are best guided by the free and autonomous decisions of individuals in the marketplace, to the near exclusion of government interference in economic matters. That is, the doctrine that government should almost always leave people alone and let them do as they please, so long as they respect the personal and property rights of others. [See also: liberalism, libertarianism]
LAND (definition of the Legal Dictionary)
Generalized economists’ term or label to cover all those factors of production that are still in their raw state (or nearly so) — that is, that have not yet been worked on or transformed by human labor [See: human capital]. Thus, “land” in the economists’ sense means not only the dry portion of the earth’s surface, but also all those natural resources such as mineral deposits, wild plants and animals, soil fertility, surface water, solar energy and the bounty of the seas that can be used in production. [See also: factors of production, rent, resources]
LAW OF DEMAND (definition of the Legal Dictionary)
Other things being held constant, the lower the price of a good (or service), the greater the quantity of it that will be demanded by purchasers at any given time. [See also: demand curve, demand schedule, demand, law of supply]
LAW OF DIMINISHING RETURNS (definition of the Legal Dictionary)
Sometimes also referred to as the law of variable proportions, this “law” is really a generalization economists make about the nature of technology when it is possible to combine the same factors of production in a number of different proportions to make the same product. The law states: When increasing amounts of one factor of production are employed in production along with a fixed amount of some other production factor, after some point, the resulting increases in output of product become…
LAW OF SUPPLY (definition of the Legal Dictionary)
Other things being held constant, the higher the price of a good (or service), the larger the quantity of that good (or service) that will be offered for sale in a particular time period. See also: supply, supply curve, law of diminishing returns, marginal analysis, marginal productivity
LEFT-WING, LEFTIST (definition of the Legal Dictionary)
General descriptive terms for any of several otherwise quite varied political ideologies (socialism, communism, social democracy, welfare statism, contemporary American liberalism, some versions of anarchism, etc.) that join in denouncing the extent of economic and social inequality in the present order of society and advocate the adoption of vigorous public policies to reduce or eliminate these inequalities, usually through some combination of the following: Reduction or elimination of…
LEGITIMACY (definition of the Legal Dictionary)
The principle that indicates the acceptance of the decisions of government leaders and officials by (most of) the public on the grounds that these leaders’ acquisition and exercise of power has been in accordance with the society’s generally accepted procedures and political or moral values. Legitimacy may be conferred upon power holders in a variety of ways in different societies, usually involving solemn formal rituals of a religious or quasi-religious nature — royal birth and coronation in monarchies,…
LIBERALISM (definition of the Legal Dictionary)
A 19th century political viewpoint or ideology associated with strong support for a broad interpretation of civil liberties for freedom of expression and religious toleration, for widespread popular participation in the political process, and for the repeal of protectionist legal restrictions inhibiting the operation of a capitalist free market economy. In the 20th century US, the term has come to describe an ideology with similar views on civil liberties and personal freedom issues but…
LIBERTARIANISM (definition of the Legal Dictionary)
A contemporary 20th century political viewpoint or ideology derived largely from 19th century liberalism, holding that any legitimate government should be small and should play only the most minimal possible role in economic, social and cultural life, with social relationships to be regulated as much as possible by voluntary contracts and generally accepted custom and as little as possible by statute law. In other words, libertarians believe that the individual should be as free as is practically…
LINE-ITEM VETO (definition of the Legal Dictionary)
A special form of veto in which the chief executive has the right to prevent particular provisions of a bill enacted by a legislative assembly from becoming law without having to kill all the other parts of the bill at the same time. Many state governors in the United States have line-item veto power with respect to at least some kinds of legislative enactment. Presidents Nixon, Ford, Reagan, Bush, and Clinton have all endorsed the idea of granting the President line-item veto powers over appropriations…
LOGROLLING (definition of the Legal Dictionary)
A practice common in the U.S. Congress and in many other legislative assemblies in which two (or more) legislators agree for each to trade his vote on one bill he cares little about in exchange for the other’s vote on a bill that is personally much more important to him. Logrolling is especially common when the legislators are relatively free of control by their national party leaders and are trying to secure votes for bills that will concentrate sizable benefits on their own home districts while…
MACROECONOMICS (definition of the Legal Dictionary)
The subdivision of the discipline of economics that studies and strives to explain the functioning of the economy as a whole — the total output of the economy, the overall level of employment or unemployment, movements in the average level of prices (inflation or deflation), total savings and investment, total consumption and so on. The focus of much of macroeconomic theory is analysis of the ways in which conscious government policies (and the unintended secondary consequences of these policies)…
MARGINAL ANALYSIS (definition of the Legal Dictionary)
A concept employed constantly in microeconomic theory (and quite frequently in macroeconomic theory as well) is that of the marginal change in some economic variable (such as quantity of a good produced or consumed), or even the ratio of the marginal change in one variable to the marginal change in another variable. A marginal change is a proportionally very small addition or subtraction to the total quantity of some variable. Marginal analysis is the analysis of the relationships between such changes…
MARKET (definition of the Legal Dictionary)
In its original meaning, a physical coming together of a sizable number of merchants and prospective customers at a pre-arranged time and place (in medieval Europe, typically once a week on the main square of the largest village in the vicinity) for the purpose of striking deals to buy and sell a variety of goods and services. Large numbers of customers came to such organized markets because they found it convenient to be able to make many of their necessary purchases on the same day in one central…
MARKET ECONOMY (definition of the Legal Dictionary)
An economy in which scarce resources are all (or nearly all) allocated by the interplay of supply and demand in free markets, largely unhampered by government rationing, price-fixing or other coercive interference. In classifying real historical economies, the level of “marketization” is not primarily an either/or issue but rather a matter of degree. The greater the proportion of the goods and services produced in the society that are allocated by market processes (rather than by government edict…
MERIT GOOD (definition of the Legal Dictionary)
A good (or service) which some “outside analyst” considers to be intrinsically desirable, uplifting or socially valuable for other people to consume, independently of the actual desires or preferences of the consumer himself. In the case of such goods, it is sometimes held that free consumer choice is inappropriate, and therefore that if many consumers left to themselves are unwilling to purchase “appropriate” quantities of such goods, they should be encouraged or even compelled to consume them…
MICROECONOMICS (definition of the Legal Dictionary)
The subdivision of the discipline of economics that studies the behavior of individual households and firms interacting through markets, how prices and levels of output of individual products are determined in these markets, the interconnections by which different markets affect each other, and how the price mechanism allocates resources and distributes income. [See also: macroeconomics, economics, political economy]
MONARCHY (definition of the Legal Dictionary)
A form of rule in which there is a single head of state, a monarch, with the title of King (or Queen) or its equivalent; in which the monarch holds his or her office for life; in which the position of monarch normally descends by rules of heredity only to members of a specific royal family; and where the monarch is popularly believed to be possessed of a religious or similar symbolic significance for the state and its institutions that legitimate his or her privileges. When the monarch rules with…
MONETARY POLICY (definition of the Legal Dictionary)
That part of the government’s economic policy which tries to control the size of the total stock of money (and other highly liquid financial assets that are close substitutes for money) available in the national economy in order to achieve policy objectives that are often partly contradictory: controlling the rate of increase in the general price level (inflation), speeding up or slowing the overall rate of economic growth (mainly by affecting the interest rates that constitute such a large share…
MONEY (definition of the Legal Dictionary)
Any generally accepted medium of exchange — that is, anything which is generally acceptable in a particular society as a means of payment or of settling debts arising out of exchanges on credit. Put slightly differently, money is a very special sort of good for which a very large proportion of the demand (at the extreme, all of the demand) is derived from people’s (realistic) expectations that it can be quickly and easily re-exchanged for some other more immediately desired good or service (rather…
MONEY STOCK (definition of the Legal Dictionary)
(Also sometimes loosely referred to as the money supply, a term that, strictly speaking, should be reserved for the entire supply schedule of associated interest rates and the quantities of money that would be created at those rates.) The money stock is the total amount of money available in a particular economy at a particular point in time. Since many different things may serve more or less well as money (or close money substitutes), and since several different sorts of things may be serving as…
MONOPOLY (definition of the Legal Dictionary)
Literally, “single seller.” A situation in which a single firm or individual produces and sells the entire output of some good or service available within a given market. If there are no close substitutes for the good or service in question, the monopolist will be able to set both the level of output and the price at such a level as to maximize profits without worrying about being undercut by competitors (at least in the short run). If demand for the good or service being sold by the monopolist…
MONOPSONY (definition of the Legal Dictionary)
Literally, single buyer. A situation in which a single firm or individual is the only buyer of a particular good or service within a given market. [See also: monopoly, competition]
NATION (definition of the Legal Dictionary)
A large aggregation or agglomeration of people sharing a common and distinctive racial, linguistic, historical and/or cultural heritage that has led its members to think of themselves as belonging to a valued natural community sharing a common destiny that ought to be preserved forever. [See also: nation state, nationalism]
NATION STATE (definition of the Legal Dictionary)
A form of state in which those who exercise power claim legitimacy for their rule partly or solely on the grounds that their power is exercised for the promotion of the distinctive interests, values and cultural heritage of a particular nation whose members ideally would constitute all, or most of, its subject population and all of whom would dwell within the borders. [See also: nation, state]
NATIONAL DEBT (definition of the Legal Dictionary)
As usually defined, this denotes the total sum of the outstanding debt obligations of a country’s central government. (But occasionally writers may use the term somewhat more broadly to refer to the total indebtedness of all levels of government, including regional and local governments, and sometimes also the indebtedness of government owned business entities such as local transit and communications systems or nationalized industries as well.) The national debt represents the accumulated total…
NATIONALISM (definition of the Legal Dictionary)
An ideology, or rather a whole category of similar ideologies, based on the premise that each nation (or at least the ideologist’s own nation) constitutes a natural political community whose members should all live together under the authority of “their own” independent nation state. When the people of one nation live in large numbers in a multi-ethnic state or in states with government(s) dominated by political elites drawn from another nationality, nationalism often becomes an ideology justifying…
NATIONALIZATION (definition of the Legal Dictionary)
The involuntary transfer of ownership of a private business or other private property to a national government, either through uncompensated seizure (expropriation) or through forced sale at a government-determined price. [See also: socialism]
NATURAL MONOPOLY (definition of the Legal Dictionary)
A monopoly that does not arise from government intervention in the marketplace to protect a favored firm from competition but rather from special characteristics of the production process in the industry under the current state of technology. Theoretically, natural monopoly arises when there are very large “economies of scale” relative to the existing demand for the industry’s product, so that the larger the quantity of the good a single factory produces, the cheaper the average costs per unit get…
OLIGARCHY (definition of the Legal Dictionary)
Any system of government in which virtually all political power is held by a very small number of wealthy but otherwise unmeritorious people who shape public policy primarily to benefit themselves financially through direct subsidies to their agricultural estates or business firms, lucrative government contracts, and protectionist measures aimed at damaging their economic competitors — while displaying little or no concern for the broader interests of the rest of the citizenry. “Oligarchy”…
OPEN MARKET OPERATIONS (definition of the Legal Dictionary)
Sales or purchases of government debt instruments (treasury bonds, treasury bills, treasury notes) on the open financial markets by a country’s central bank (in the U.S., the Federal Reserve) as part of its efforts to influence the size of the money supply and the levels of interest rates. Central bank decisions to buy up government debt instruments make for an expansionary monetary policy, while sales of government debt instruments by the central bank represent a contractionary monetary policy….
OPTIMUM (definition of the Legal Dictionary)
The very “best” possible situation or state of affairs according to some explicit objective that provides a precise standard of evaluation. For example, if a business firm’s objective is to make the biggest profits possible (as economists generally assume it is), then the firm’s optimal level of output at any given level of sales prices and production costs is that at which its profits will be the highest possible. Most of economics is concerned with analyzing how individuals or groups of people…
ORGANIZATIONAL PROCESS MODELS OF DECISION-MAKING (definition of the Legal Dictionary)
Where formal organizations are the setting in which decisions are made, the particular decisions or policies chosen by decision-makers can often be explained through reference to the organization’s particular structure and procedural rules. Such explanations typically involve looking at the distribution of responsibilities among organizational sub-units, the activities of committees and ad hoc coordinating groups, meeting schedules, rules of order etc. The notion of fixed-in-advance standard operating…
PHILLIPS CURVE (definition of the Legal Dictionary)
In the late 1950s, the British economist A.W. Phillips demonstrated an inverse statistical association between annual changes in average wage rates and the rate of unemployment. When the annual wage growth rates and unemployment rates for Great Britain for each of the years from 1861 to 1957 were plotted as points on a two-dimensional graph, they rather neatly approximated a shallow hyperbola-shaped curve convex to the origin of the graph. That is, in years when unemployment rates were low, average…
PLURALIST THEORY (definition of the Legal Dictionary)
The theoretical point of view held by many social scientists which holds that American politics is best understood through the generalization that power is relatively broadly (though unequally) distributed among many more or less organized interest groups in society that compete with one another to control public policy, with some groups tending to dominate in one or two issue areas or arenas of struggle while other groups and interests tend to dominate in other issue areas or arenas of struggle….
POLITICAL BUSINESS CYCLE (definition of the Legal Dictionary)
A business cycle that results primarily from the manipulation of policy tools (fiscal policy, monetary policy) by incumbent politicians hoping to stimulate the economy just prior to an election and thereby greatly improve their own and their party’s reelection chances. Expansionary monetary and fiscal policies have politically popular consequences in the short run (tax cuts, falling unemployment, falling interest rates, new government spending on services for special interests, etc.). Unfortunately…
POLITICAL ECONOMY (definition of the Legal Dictionary)
A branch of the social sciences that takes as its principal subject of study the interrelationships between political and economic institutions and processes. That is, political economists are interested in analyzing and explaining the ways in which various sorts of government affect the allocation of scarce resources in society through their laws and policies as well as the ways in which the nature of the economic system and the behavior of people acting on their economic interests affects the…
POLITICAL PARTY (definition of the Legal Dictionary)
An organized group that has as its fundamental aim the attainment of political power and public office for its designated leaders. Usually, a political party will advertise a common commitment by its leaders and its membership to a set of political, social, economic and/or cultural values (an “ideology”) that distinguish it from other political parties and which supposedly provide the basis for the policies the party proposes to implement or maintain through its members who obtain public office….
POLITICAL SCIENCE (definition of the Legal Dictionary)
The branch of the social sciences that is primarily concerned with analyzing and explaining the functioning of political institutions (especially governmental institutions) as well as the political behavior of individuals, groups and organizations in their efforts to influence or resist the decisions and policies of government. [See also: political economy]
POPULAR SOVEREIGNTY (definition of the Legal Dictionary)
The political/legal principle that all legitimate political authority within a society derives ultimately from the will or, at least, from the generalized consent of the subject population. See also: legitimacy, ideology
POPULISM (definition of the Legal Dictionary)
The ideologies of any of a number of political movements that demand the redistribution of political power, economic dominance and/or cultural leadership away from what are seen as corrupt, greedy, over-centralized, urban-based oligarchies in favor of empowering “the common people,” particularly those who live in rural or small-town areas, since such people are typically idealized by populists as embodying a simpler, more virtuous way of life based on traditional values and customs. Populists…
PORK-BARREL LEGISLATION (definition of the Legal Dictionary)
Appropriations of public funds by Congress (or other legislative assemblies) for projects that do not serve the interests of any large portion of the country’s citizenry but are nevertheless vigorously promoted by a small group of legislators because they will pump outside taxpayers’ money and resources into the local districts these legislators represent. Successful promotion of such pork-barrel legislation (often through skillful logrolling) is very likely to get the legislator re-elected by his…
PRICE CONTROLS (definition of the Legal Dictionary)
A form of government intervention in the economy in which a government agency uses its law-making power to regulate the prices at which otherwise voluntary private exchanges may take place. The government agency may attempt to fix and enforce the exact prices at which a particular good or service may be sold (as for example when state regulatory commissions fix the rates for electricity, gas or water to be sold by monopoly utility companies in particular geographic areas). Alternatively, the government…
PRIVATE ENTERPRISE (definition of the Legal Dictionary)
A business or other economic organization not owned by the government but rather operated for profit or other private benefit. See also: private sector, public sector
PRIVATE PROPERTY RIGHTS (definition of the Legal Dictionary)
The basic rights of individuals (and organizations or associations of people functioning as a single conglomerate “legal person” such as corporations, partnerships, churches, non-profit foundations, etc.) to the peaceful possession, control and enjoyment of the things they own as well as their rights to make contracts to rent, sell or give away all or part of their various ownership rights over these possessions (or these possessions’ services) to any other people willing to accept the owners’…
PRIVATE SECTOR (definition of the Legal Dictionary)
The part of an economy in which goods and services are produced and distributed by individuals and organizations that are not part of the government or state bureaucracy. See also: private enterprise, public sector
PRODUCTIVITY (definition of the Legal Dictionary)
The value of output (goods and services) produced per unit of input (productive resources) used. Thus an increase in productivity means producing more goods and services with the same amount of resources, or producing the same goods and services with fewer resources, or some combination of these two possibilities. While productivity is often measured or referred to only in terms of the productivity of labor (output per man-hour), a more precise and complete view of the sources of productivity incorporates…
PROFIT (definition of the Legal Dictionary)
The amount of the excess of total sales revenue over the total costs of production of the good(s) or service(s) produced by a business firm. The term “profit” is used somewhat more narrowly by economists than the way it is used by the Internal Revenue Service or even by most businessmen and accountants. The economists’ concept of profit emphasizes that “costs of production” for purposes of the definition include the full opportunity costs of all the factors of production utilized —…
PROGRESSIVE TAX (definition of the Legal Dictionary)
A tax that tends to take a smaller percentage of the incomes of lower income citizens compared to the percentage it takes of the incomes of wealthier citizens. Example: an income tax with steeper rates for those in higher income brackets, or a special sales tax levied only on expensive “luxuries” like yachts or jewelry. See also: tax, regressive tax
PROPAGANDA (definition of the Legal Dictionary)
Persuasive communications directed at a specific audience that are designed to influence the targeted audience’s opinions, beliefs and emotions in such a way as to bring about specific, planned alterations in their behavior. The information communicated by the propagandist may be true or false, the values appealed to may be sincerely held by the propagandist or cynically manipulated, and the presentation may be either logically and dispassionately argued or rhetorically tailored to arouse the most…
PROPERTY RIGHTS (definition of the Legal Dictionary)
A property right is the exclusive authority to determine how and by whom a particular resource is used. More broadly, property rights may be seen as a bundle of separate and distinct rights over a particular good — including at least the right of personal use, the right to demand compensation as a prerequisite for its use by other people, and the right to transfer any or all of these rights to others (either permanently by sale or temporarily through some form of contractual arrangement). Property…
PROTECTIONISM (definition of the Legal Dictionary)
Any of several political-economic doctrines that have in common advocating that government impose political barriers to international trade (usually taxes on imports or quantitative restrictions limiting the volume of legally allowable imports of each particular good) in order to “protect” a domestic firm (or firms) manufacturing these same goods from foreign competition and thereby make it (them) more profitable than would otherwise be the case under free competition. Although difficult to…
PUBLIC GOODS (definition of the Legal Dictionary)
Also called collective goods. These are a very special class of goods which cannot practically be withheld from one individual consumer without withholding them from all (the “nonexcludability criterion”) and for which the marginal cost of an additional person consuming them, once they have been produced, is zero (the “nonrivalrous consumption” criterion). The classic example of a nearly pure public good is national defense: you cannot defend the vulnerable border regions of a country from…
PUBLIC SECTOR (definition of the Legal Dictionary)
The part of an economy in which goods and services are produced and/or (re)distributed by government agencies. See also: private sector
RATIONAL-COMPREHENSIVE DECISION-MAKING (definition of the Legal Dictionary)
A theoretical model of how public policy decisions are (or perhaps ought to be) taken. All possible options or approaches to solving the problem under study are identified and the costs and benefits of each option are assessed and compared with each other. The option that promises to yield the greatest net benefit is selected. The main problem with rational-comprehensive approaches is that it is often very costly in terms of time and other resources that must be devoted to gathering the relevant…
REFERENDUM (definition of the Legal Dictionary)
A vote taken by the general public to decide an important legislative or policy issue directly (rather than having the issue decided by a representative assembly or other legislative agency). See also: democracy
REGRESSIVE TAX (definition of the Legal Dictionary)
A tax that tends to take a larger percentage of the incomes of lower income citizens than it takes from the incomes of higher income citizens. Examples: a poll tax, a flat percentage tax on only the first so many dollars of income (like the social security tax) or a sales tax on consumption items of common necessity (like groceries). See also: tax, progressive tax
RENT (definition of the Legal Dictionary)
The price paid (per unit of time) for the temporary use of a durable good (especially land and/or buildings) that the user does not own. Abbreviated expression for the specialized economists’ term economic rent, which refers to the amount of any payment to the owner of a factor of production (land, labor or capital) that is above and beyond the minimum payment that would have been necessary to motivate that owner not to transfer it to some other use. Thus the economic rent in a sales transaction…
RENT-SEEKING BEHAVIOR (definition of the Legal Dictionary)
The expenditure of resources in order to bring about an uncompensated transfer of goods or services from another person or persons to one’s self as the result of a “favorable” decision on some public policy. The term seems to have been coined (or at least popularized in contemporary political economy) by the economist Gordon Tullock. Examples of rent-seeking behavior would include all of the various ways by which individuals or groups lobby government for taxing, spending and regulatory policies…
REPUBLIC (definition of the Legal Dictionary)
Originally, any form of government not headed by an hereditary monarch. In modern American usage, the term usually refers more specifically to a form of government (a.k.a. “representative democracy”) in which ultimate political power is theoretically vested in the people but in which popular control is exercised only intermittently and indirectly through the popular election of government officials and/or delegates to a legislative assembly rather than directly through frequent mass assemblies…
RESERVE REQUIREMENT (definition of the Legal Dictionary)
The minimum percentage of their customers’ total demand deposits (checking account balances) that banks are legally required to keep on hand in cash or as deposits in their accounts at the regional Federal Reserve bank. In the United States, the Federal Reserve’s Board of Governors is empowered to set the reserve requirement for member banks at its discretion. This power provides one of the Fed’s more powerful policy tools for influencing the banks’ willingness and ability to extend or call in loans,…
RESOURCES (definition of the Legal Dictionary)
The available material means for pursuing human goals or desired objectives. See also: factors of production
RIGHT-TO-WORK LAWS (definition of the Legal Dictionary)
State laws that make it illegal for labor unions and employers to enter into contracts that provide for a business to employ only union members in the jobs covered by the contract. One typical version of a right-to-work law reads “No person may be denied employment, and employers may not be denied the right to employ any person, because of that person’s membership or non-membership in any labor organization.” Labor union leaders typically seek the repeal of right-to-work laws because much lower…
RIGHT-WING, RIGHTIST (definition of the Legal Dictionary)
A general descriptive term for any of several otherwise rather different, conservative, reactionary or fascist political ideologies, the common denominator of which is their qualified or enthusiastic support for the main features of the current social and economic order, accepting all (or nearly all) of its inequalities of wealth, status and privilege (or even in some cases support for a return to an earlier, even more inegalitarian and hierarchical political-economic order). Right wing ideologies…
SAVINGS (definition of the Legal Dictionary)
All income of households (and firms) that is neither immediately spent on goods and services for final consumption nor taken by the government as taxes. Such savings may be held as balances in bank accounts or as cash on hand. Savings may be held for the purpose of subsequent investment or for some other purpose, such as accumulating sufficient funds for future consumption spending on big ticket items, maintaining an emergency reserve against the possibility of unpredicted consumption expenses,…
SCARCITY (definition of the Legal Dictionary)
A condition where there is less of something available than at least some people would like to have if they could have them at no cost to themselves. Note that this technical economic definition of “scarcity” differs greatly from the notion of scarcity as “unusual rarity” that predominates in most ordinary language. (For example, automobiles are not currently “scarce” in Los Angeles in the sense of being rare or unusual to see, but they are definitely “scarce” in the economic sense…
SENIORITY (OF A US REPRESENTATIVE OR SENATOR) (definition of the Legal Dictionary)
The number of years of unbroken service that a member of a standing Congressional committee has on that committee. The Rules of the House and Senate (and the rules of the Democratic and Republican caucusses within each chamber) have always given great weight to differences in seniority in allocating power and privileges among their members. The majority party committee member with the most seniority will almost invariably be selected as chairman of the committee and thus be awarded the power to…
SEPARATION OF POWERS (definition of the Legal Dictionary)
One of the most important of the basic principles that guided the framers of the US Constitution in their design for America’s future governance was the idea that the root cause and essence of tyrranical government is the concentration of control over all the powers and functions of government in the hands of the same individual or narrow political faction. The corollary the Framers drew from this was the separation of powers principle: that free popular government can best be sustained by dividing…
SEQUESTRATION (definition of the Legal Dictionary)
Originally a legal term referring generally to the act of valuable property being taken into custody by an agent of the court and locked away for safekeeping, usually to prevent the property from being disposed of or abused before a dispute over its ownership can be resolved. But the term has been adapted by Congress in more recent years to describe a new fiscal policy procedure originally provided for in the Gramm-Rudman-Hollings Deficit Reduction Act of 1985 — an effort to reform Congressional…
SOCIALISM (definition of the Legal Dictionary)
A class of ideologies favoring an economic system in which all or most productive resources are the property of the government, in which the production and distribution of goods and services are administered primarily by the government rather than by private enterprise, and in which any remaining private production and distribution (socialists differ on how much of this is tolerable) is heavily regulated by the government rather than by market processes. Both democratic and non-democratic socialists…
SPECIALIZATION (definition of the Legal Dictionary)
In the economic sense, the social phenomenon of individual human beings or organizations each concentrating their productive efforts on a rather limited range of tasks. Specialization entails focussing on a narrow area of knowledge or skill or activity. It involves a person’s or an organization’s adapting for the unusually effective or efficient performance of some particular function, often at the expense of the individual’s or organization’s ability to perform most other functions for themselves,…
STARE DECISIS (definition of the Legal Dictionary)
Literally, “Let the decision stand.” The policy or practice of judges to abide by the legal rules or principles already established in earlier cases of the same sort. See also: common law, judicial restraint
STATE (definition of the Legal Dictionary)
A specialized type of political organization characterized by a full-time, specialized, professional work force of tax-collectors, soldiers, policemen, bureaucrats and the like that exercises supreme political authority over a defined territory with a permanent population, independent from any enduring external political control and possessing a local predominance of coercive power (always supplemented with moral and remunerative incentives as well) great enough to maintain general obedience to…
SUBSIDY (definition of the Legal Dictionary)
In general, a special money payment by a government to one or more firms in a favored industry, usually for the purpose of enabling them to sell one or more of their products at a price below their costs of production (or at least at a price below the free market price). Subsidies are typically advocated either to promote more widespread consumption of some good or service deemed to be especially essential or meritorious by the government (“merit goods”), to boost the levels of production of goods…
SUBSTITUTE GOODS (definition of the Legal Dictionary)
Two (or more) products for which the demand schedules are related to each other in such a way that an increase in the price of one good (other things being equal) will result in a rightward shift of the entire demand schedule for the other good, so that more of the second good will then be demanded at any given available price of the second good. (By the same token, a decrease in the price of the first good will result in a leftward shift of the entire demand schedule for its substitute, so that…
SUPPLY (definition of the Legal Dictionary)
The willingness and ability of potential sellers to offer various specific amounts of a good or service for sale at each of a variety of alternative prices during a particular time period. See also: law of supply, supply schedule, supply curve, demand
SUPPLY CURVE (definition of the Legal Dictionary)
A graphical representation of a supply schedule. Conventionally, the supply curve is drawn between axes with price plotted along the vertical axis and number of units of the good or service supplied plotted along the horizontal axis. Where the law of supply applies to the particular market under consideration, the supply curve will slope (either gently or steeply) upwards from left to right. See also: supply, supply schedule
SUPPLY SCHEDULE (definition of the Legal Dictionary)
A table or listing showing the exact quantities of a single type of good (or service) that potential sellers would offer to sell at each of a number of varying prices during some particular time period. Supply schedules may be drawn up to reflect the behavioral propensities of a single unique individual, household, or firm — or, more frequently encountered in microeconomic analysis, composite supply schedules for the particular good may be derived by adding up all the supply schedules of the large…
SUPPLY SIDE ECONOMICS (definition of the Legal Dictionary)
A school of thought within the economics profession emphasizing that the main source of a country’s economic growth is constant improvement in the efficiency with which resources are allocated for production. While the policy recommendations of the rival Keynesian school tend to focus almost entirely on what government can do to stimulate or restrain aggregate demand in the short-run so as to even out the business cycle, supply-side policy analysts focus on barriers to higher productivity — identifying…
SUPPLY, LAW OF (definition of the Legal Dictionary)
Other things being held constant, the higher the price of a good (or service), the larger the quantity of that good (or service) that will be offered for sale in a particular time period. See also: supply, supply curve, law of diminishing returns, marginal analysis, marginal productivity
SURPLUS, BUDGET (definition of the Legal Dictionary)
The amount by which government revenues are more than government spending during a specified period. See also: budget, budget deficit, national debt, tax, fiscal policy
SYSTEMS THEORY MODELS OF DECISION-MAKING (definition of the Legal Dictionary)
General systems theory emphasizes the way in which organized systems (human and non-human) respond in an adaptive way to cope with significant changes in their external environments so as to maintain their basic structures intact. Systems theory models of decision-making in human groups and organizations emphasize their interaction with “outside” actors and organizations and concentrate on identifying the particular elements in the environment of the group or organization that significantly affect…
TARIFF (definition of the Legal Dictionary)
A tax imposed on goods imported from outside the country that is not imposed on similar goods from within the country. Import tariffs may be levied on an ad valorem basis, i.e., as a certain percentage of the estimated market value of the imported item; or on a “specific” basis, i.e., as a fixed dollar amount per unit imported. Import tariffs (or “duties”) may be imposed mainly for the purpose of raising revenues because they are relatively cheap and easy taxes for a small or poorly organized government…
TAX, TAXATION (definition of the Legal Dictionary)
A compulsory transfer of money (or occasionally of goods or services) from private individuals, institutions or groups to the state. The amount and timing of the levy exacted from the individual taxpayer may be determined on the basis of any of a very large number of factors, but historically the most common sorts of tax have been levied based on the wealth or the income or some other characteristic of the particular taxpayer at a given time (“direct taxes” like income tax, social security tax,…
THEOCRACY (definition of the Legal Dictionary)
A form of government in which the clergy exercise or bestow all legitimate political authority and in which religious law is dominant over civil law and enforced by state agencies. See also: legitimacy, ideology, state
TORT (definition of the Legal Dictionary)
Legal term. A wrongful or injurious act (other than breaking a contract) for which a civil suit may be brought in court by private persons. If the suit is successful, the court may award the victims cash compensation for damages, “punitive” damages above the actual cost of the injury in order to punish the defendent, and/or a court order banning any future repetitions of the kind of behavior giving rise to the suit. For example, a householder might sue the owners of a nearby factory for creating…
TOTALITARIANISM (definition of the Legal Dictionary)
Domination by a single, like-minded governing elite of all (or virtually all) organized political, economic, social and cultural activities in a country by means of a single-party monopoly of power, police repression not only of all forms of dissent and opposition but also of all forms of independent private organizations as such, rigorous censorship of the mass media, centralized state planning and administration of the economy, and pervasive propaganda to inculcate the principles of the obligatory…
TRADE-OFF (definition of the Legal Dictionary)
When choices are made (collectively or by an individual) to accept having less of one thing in order to get more of something else, the results are called trade-offs. For example, when one is allocating (limited) funds, the trade-off usually involves reduced spending for some purposes in order to be able to spend more for other more urgent purposes. However, the concept does not apply only (or even primarily) to decisions involving money. A student faced with the choice of spending Saturday studying…
TRANSACTION COSTS (definition of the Legal Dictionary)
The costs other than the money price that are incurred in trading goods or services. Before a particular mutually beneficial trade can take place, at least one party must figure out that there may be someone with which such a trade is potentially possible, search out one or more such possible trade partners, inform him/them of the opportunity, and negotiate the terms of the exchange. All of these activities involve opportunity costs in terms of time, energy and money. If the terms of the trade are…
TRANSFER PAYMENT (definition of the Legal Dictionary)
A payment of money by the government to an individual that does not form part of an exchange but rather represents a gift without anything being received or required in return. Examples of transfer payments would include student scholarship grants, welfare checks, and social security benefits. Establishing programs providing for transfer payments from the budget to particular favored categories of the population represent one of the most direct ways in which a government may pursue policies of income redistribution.
UNEMPLOYMENT (definition of the Legal Dictionary)
A situation which exists when members of the labor force wish to work at the prevailing wage or salary rates for their skills, but cannot get a job. The concept thus refers to “involuntary” unemployment only, rather than the voluntary decision of someone to choose leisure (or productive activity outside the cash economy such as housewifery) rather than gainful employment at prevailing rates of pay. Most post-World War II governments have made it a major goal of their economic policies to keep total…
UNEMPLOYMENT RATE (definition of the Legal Dictionary)
A measure of the extent of unemployment in the labor force at some particular time, expressed as a percentage of the total available labor force. Nearly all national governments now have some statistical agency or department charged with gathering the necessary data and estimating the unemployment rate at frequent intervals (monthly or quarterly) for the guidance of policy-makers. In broad terms the underlying concepts are pretty similar from one country to the next: the number of people classified…
UTILITY (definition of the Legal Dictionary)
An economic concept referring to the precise degree of personal satisfaction, pleasure, or sense of want-fulfillment an individual derives from consuming some quantity of a good or service at a particular point in time. Obviously no two persons assign identical utilities to any given good because human tastes and preferences vary sharply. Nor is there any standard objective unit in which both “utility for me” and “utility for thee” can be measured and compared to each other. But presumably each…
VETO (definition of the Legal Dictionary)
A privileged single vote that, according to some systems of rules for decision-making, has the effect of blocking or negating a majority decision. In the United States, the President may veto a bill passed by majorities in both houses of Congress, preventing it from becoming law unless each house then re-passes the bill by a two-thirds majority. In the United Nations Security Council, a negative vote (veto) by even one of the five permanent member states (the USA, Russia, Britain, France and China)…
VETO, LINE-ITEM (definition of the Legal Dictionary)
A special form of veto in which the chief executive has the right to prevent particular provisions of a bill enacted by a legislative assembly from becoming law without having to kill all the other parts of the bill at the same time. Many state governors in the United States have line-item veto power with respect to at least some kinds of legislative enactment. Presidents Nixon, Ford, Reagan, Bush, and Clinton have all endorsed the idea of granting the President line-item veto powers over appropriations…
WELFARE STATE (definition of the Legal Dictionary)
A state whose government devotes a very large proportion of its activities and expenditures to the direct provision of personal benefits to be consumed by qualifying individuals or families (as contrasted with such more traditional and less individually divisible government activities as national defense, law enforcement, controlling the money supply, economic regulation, maintaining transportation and communications nets, administering the public lands, etc.). Welfare benefits to individuals may