collective good
A PUBLIC GOOD allocated by political decisions,not by the market.
collectivization of agriculture
The reorganization of a country’s agricultureinto state farms thereby depriving peasants of landownership and management.
Collectivization in the USSR wasintroduced in 1929 but was not implemented in a major and systematic way until the 1930s: it was accompanied by much resistance and a famine which killed millions. Subsequently, other countries following the principles of Marxist-Leninism have attempted draconian changes of this kind, e.g. Mao’s China and Ethiopia.
collectivized investment
A MUTUAL FUND or UNIT TRUST.
Collor Plan
A plan to stabilize the Brazilian economy. collor i was launched in 1990, collor ii in 1991. The plans included wage and price freezes to combat inflation rising at 1,800 per cent; they were named after Fernando Collor, President of Brazil.
collusion
Joint action, usually by oligopolists, to control prices and market shares. It is illegal in most capitalist countries, e.g. in the USA under antitrust legislation. As Adam smith, the apostle of competition, observed in his Wealth of Nations ‘People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.’
Combination Acts
UK legislation of 1799 and 1800 which, like the Common Law, outlawed trade union membership and activities amounting to conspiracy. The repeal of these Acts in 1824 made possible the organization of labour in England.
Com-dev company
Commercial development company whose activities often include commercial real estate and commercial software.
COMET
An econometric model of European economies whose name is an abbreviation of ‘COmmon market MEdium Term model’. It was created in 1970 and based on eight national models for West Germany, France, italy, the Netherlands, Belgium, the UK, Ireland and Denmark. It is dynamic, giving predictions over time paths of five to ten years. It models the real sector of these economies: monetary and financial elements, represented by interest rates, are exogenous. The interdependence of the economies are chiefly described by trade flows. One of the applications of the model has been to develop the methodology of european union economic policy.
Command and control regulation
Administrative and statutory rules concerning pollution control. Sources of pollution are narrowly defined, specific control devices prescribed and emissions standards applied. Critics of this approach to pollution control assert that it ignores both the extent of pollution damage and the costs of regulation.
command economy
An economy in which the orders of a central planning authority to lower level economic organizations have the force of law. Lower level organizations are instructed to follow particular practices and to use stated prices, inputs and output targets. The first modern economy of this type was devised by Lenin who was inspired by the German military organization of the First World War. Until the mid-1980s, the planning mechanism of the Soviet-type economy had command characteristics.
Commanding heights
1 The basic industries of an economy, especially energy, transport and telecommunications. It is argued that as a high proportion of their output consists of intermediate goods, these industries if controlled would contribute substantially to the control of the economy as a whole.
2 Education and training which are basic to the performance and growth of industry.
commercial bank
A bank providing a wide range of banking services, including receiving deposits from the public and the making of loans. As a consequence of more competition in the financial sector, these banks have diversified into insurance, mortgage finance and a wide range of business finance, previously the concern of investment/merchant banks alone.
commercial bill
A short-term bill of exchange by which the person who draws it promises to pay the drawee the sum specified on a particular future date, one, two, three or six months hence. This method of finance was extensively used in the UK in the early nineteenth century before banks were prepared to make short-term advances in the form of overdrafts to their customers. It is still a popular form of short-term finance. When a bill of this kind is accepted by an accepting house, becoming a bank bill, it is possible for the drawee to obtain immediate payment at a discount (fixed according to the ruling short-term money market interest rate).
commercial paper
A form of short-term company borrowing,usually for thirty days. These unsecured IOUs permit companies to borrow directly from investors, bypassing banks and bond markets. Banks, however, are used as agents to place the paper; sometimes investment banks underwrite the IOUs investing themselves. This type of financing, long used in the USA, was introduced into the UK in 1986; also used in many other countries, including France, Australia, Hong Kong and Singapore.
commercial policy
The international trading policy of a national government with respect to import duties/quotas and export subsidies. These policies have been a central issue in economics since the mercantilists first debated the merits of tariffs.
Committee of Twenty
A committee of twenty leading members of the INTERNATIONAL MONETARY FUND, officially known as the ‘Committee on the Reform of the international Monetary system’, with the task of considering the possibility of reviving a bretton woods type of pegged exchange rate regime and the supply of international reserve assets. The floating of several exchange rates prevented it from reaching its central objective. It finally reported in June 1974.
commodification
The transformation of money into a commodity. This has occurred because commercial banks now resemble industrial conglomerates with a range of financial products. marx had previously stated that the nature of exchange under capitalism is to change money into a unique commodity exchangeable with all commodities.
commodity
1 something, usually physical, which can be bought and sold and is directly measurable. The concept is used extensively in both marxian economics and general equilibrium analysis since hicks. marx argued that through the exchange process goods lose their use value, becoming ‘citizens of the world’ and merely the vehicle for merchants to earn surplus value. sraffa regarded a commodity as a good or service produced by a unique combination of factor inputs. 2 A raw material or primary product.
commodity agreement
An international agreement between producing and consuming countries to stabilize prices and organize quotas for major metals and foodstuffs.
The UNITED NATIONS CONFERENCE ON TRADE and development recommended eighteen agreements in 1977 but only achieved them for sugar, cocoa, tin, rubber and coffee.
Commodity Credit Corporation
US federal body set up by the agricultural adjustment act 1933 to provide a price support system for US farmers. It lends to farmers who pledge their crops as collateral. Farmers can deliver their crops to the ccc in lieu of repaying the loan and any accumulated interest. These crops can be resold by the ccc if their market price is greater than the ‘loan rate’, i.e. the price on which the loan was based.
Commodity Exchange of New York
The major US metals exchange in 1870. Most of its trading is in futures. commodity fetishism (D2) Marxian term for a fantastic attitude towards production, i.e. regarding a social relationship between men as a relation between things divorced from their use value.
Commodity Futures Trading Commission
US federal commission set up in 1974 and operational since 1975 to regulate the eleven US futures exchanges, its members and brokerage houses. It covers a wide range of futures trading, including trading in agricultural commodities, currencies, metals and securities. It aims to ensure fair trading and financial integrity, e.g. by requiring customer funds to be kept in separate bank accounts.
commodity reserve currency
A currency with a value based on a ‘basket’ of commodities representative of average consumption. This currency tends to be stable over time, as happened under the gold standard, and can take a variety of forms reflecting the technical characteristics of commodities at a particular time and the desired level of stability. However, it has been argued that few commodities are suitable for inclusion in the ‘basket’, e.g. on account of storage difficulties, but using commodity futures could eliminate many of these problems.
commodity stabilization schemes
International agreements designed to introduce order into international primary commodity markets, usually with the aim of helping less developed countries. A typical scheme would draw up a price stabilization plan to prevent the agricultural incomes of these countries falling below their present levels.
commodity tax
A tax on a good, usually taking the form of a sales tax or an excise duty.
commodity trade structure
The composition of a country’s imports and exports classified by major product groups. The structure is some indication of the stage of economic development of the country, e.g. Third World countries tend to have a preponderance of primary products amongst their exports. The commodity structure is examined to test hypotheses about international trade, e.g. the HECKSCHER-OHLIN TRADE THEOREM.
common access resources
Jointly owned natural resources, e.g. a piece of agricultural land open to all adjoining a town. The major departure from the principle of common access occurred in Great Britain from the thirteenth century onwards when common land was enclosed into private holdings.
Common Agricultural Policy
The major economic policy of the European community costing over 40 per cent of the community’s budget. The principles of the policy were formulated at the stresa conference of 1958 and embodied in Articles 38 to 47 of the treaty of rome. It has been more protectionist than several of the national agricultural policies that it replaced. The policy, started in the first Mansholt plan of 1960, intended to control the ‘agriculture’ of the member countries in the widest sense of farming and all related industries, including fertilizer producers, machinery and food processing. implementation of the policy was slow, e.g. the target price for cereals, the central agricultural commodity of the European community, was not agreed until December 1964. The European Agricultural Guidance and Guarantee Fund was set up to finance refunds on exports to third countries, intervention measures to stabilize markets and common measures, including structural modifications.
The policy has used a ‘single price system’ of target prices throughout the European community for fixing intervention prices and frontier crossing point c.i.f. prices. These prices are expressed in council regulations. Price support has been intended both to support farmers’ incomes and to make the European community self-sufficient in agricultural produce. But it has been very costly as overproduction has led to at least 60 per cent of the agricultural budget being spent on disposing of surpluses. Temporary bans on production and the giving of surpluses to charities are used from time to time. Mansholt in Agriculture 1980 (published 1968) set out a ten-year plan for restructuring European agriculture, including the retiring of farmers and the concentration of agricultural production into larger and more efficient units. The plan achieved little as it met with national resistance, especially for threatening the existence of small family farms. This policy has reduced European Community imports from the rest of the world and insulated community domestic prices for agricultural produce from world price fluctuations, destabilizing the prices and incomes of the farmers of other countries. Within the European Community, the policy has redistributed income from consumers and taxpayers to producers and discriminated against industry. In countries such as the UK, higher food costs have met with much criticism; in developing countries, many farmers have gone out of business through being excluded by so large a market as the European Community. The uruguay round of the general agreement on tariffs and trade negotiations attempted to reduce the protectionism of the CAP.
common cost
The cost of an input simultaneously used in the production of several goods and services of a firm.
common currency
A currency available for transactions by several countries which still retain their own currencies; not a single currency. It was suggested that the ecu could take on this role.
common external tariff
The tariff protecting a free-trade area, e.g. the european community. Some countries outside the area may be permitted to have privileged access, e.g. those Third World countries allowed by the lome convention to export to European Community countries preferentially.
common market
A customs union within which there is free movement of labour and capital, no tariffs between its member countries and a common external tariff to exclude other countries’ produce. A common market in many respects behaves like a national economy as all firms of the same industry are in competition across national boundaries and can draw upon the same pool of labour and financial capital. The absence of tariffs within this market enables production to be allocated according to the principle of comparative advantage. The european union is a major modern example.
common ownership
1 Property rights conferred upon a group, e.g. the use of land by residents of a village.
2 ownership by the state or one of its agencies, e.g. a nationalized industry:
common pool resources
Natural or human-made resources which provide social and economic benefits for a community or communities. These include forests, wetlands and water accumulations. it is difficult to exclude individual users from these common resources but it is easy for an individual to exploit the resource to the detriment of the community. Use has to be co-ordinated to prevent over- exploitation.
common property resources
Land or other natural resources which are not owned by an individual because no property rights have been defined or a corporate body has made them freely available to all.
common resource problem
The difficulty of assigning to a particular user the cost of using a resource available to several users.
Commons, John Rogers, 1862-1945
US economist who was born in Hollands-burg, Ohio, and a founder of institutional economics. Although educated as a graduate student at Johns Hopkins University, he was never able to finish a college or university degree course. He held academic posts at Wesleyan University and Syracuse University. Much of his life was spent in empirical work in Wisconsin, constructing an index of wholesale prices, investigating labour unions and investigating the economic concepts present in legal reasoning. He took as the foundation of economics volitional theories of value and cost, rather than those based on utility or a commodity: He used US Supreme Court cases to establish the working rules which guide and restrain individuals in transactions, the key units of economics. ‘Value’ and ‘economy’ were treated as the transactions of millions of people engaged in valuing and economizing. His legal researches also led him to analyse the nature of bargaining power.
common stock
The equity capital of a US corporation. The owner of common stock is entitled to vote in general meetings, to receive declared dividends and to obtain a share in the net assets of the corporation on its dissolution. This stock does not usually have a par value.
Commonwealth Grants Commission
An independent Australian statutory body founded in 1933 with the original aim of dealing with states in need of special assistance. Now it makes special grants to the states to enable services to conform to minimum standards. Most of these grants are unconditional, i.e. not earmarked.
communal economy
An economy consisting of communes as basic units of production. Usually, income is equally distributed among commune members and there is no outside ownership of capital. As communes tend to be self-sufficient, production is primarily for members’ consumption. Modern technology is often deplored and strict rules govern the conduct of the commune members. Many examples of these idealistic communities exist, including Robert owen’s experiment at New Lanark, Scotland, in the nineteenth century, the Israeli kibbutz and, in the USA, the Shakers and the Hutterites.
Communaute Economique de L’Afri-que de l’Ouest
A customs union with joint sectoral policies created in 1974 and consisting of the ivory coast, Mali, Mauritania, Niger, Senegal and Upper Volta as members.
commune
An association of persons jointly owning a productive enterprise and managing it themselves. The most famous examples are the Paris Commune of 1871, the Israeli kibbutz and Robert owen’s communities in the early nineteenth century in England and the USA.
communism
A society with common ownership of capital and income distribution according to need. Under Marxist-Leninism it is strictly defined as the final stage of socialism when the state has withered away, everyone is equal as members of a universal proletariat, and there is no division of labour. marx’s vision was exceedingly vague because his concern was to analyse contemporary capitalism rather than future socialism. The nearest to communism has been in small idealistic communities; larger societies are unlikely to consent to such levelling. The term was often applied loosely to the centrally planned state capitalist countries of the comecon and china.
communitarianism
An economic philosophy sometimes called the third way that is opposed to the doctrine of individualism and the praise of economic man. A collectivist successor to socialism that opposes libertarianism.
community
A collectivity: a household, a neighbourhood, village, city, state, transnational interest group, in ascending order of size.
community charge
A form of UK local taxation often called the ‘poll tax’ and levied on most adults over 18 years old. It was introduced in Scotland in 1989 and in England and Wales gradually from 1990. It replaced the existing rates system and was combined with a UNIFORM BUSINESS RATE. A principal aim of this charge was to encourage the adult population to bring pressure upon their local governments to moderate their expenditure: by increasing the number paying local taxation it was hoped there would be more opposition to local government overspending. Critics opposed its high collection cost and regressive nature (only giving rebates to the very poor). Also it was argued that a community charge should only be used to finance public goods. In 1991, it was decided to replace it with a modified property tax, the council tax.
community programme
UK employment measure to help the long-term unemployed by providing them with jobs of benefit to the community, e.g. rehabilitating wasteland. These are offered on a temporary basis and are often disliked for being low paid.
commuting
Daily journeys of workers between their homes and places of work. When a transport network makes places distant from a centre of production more accessible, house building occurs in outlying areas, causing land and property prices to rise. Other effects of commuting include increased traffic congestion and the difficulty of financing city services used by, but not paid for, commuting workers.
company
A legal entity or corporate body brought into existence by registration under the UK Companies Acts (1844 and subsequently).
A company is owned by shareholders whose legal personalities are distinct from the corporate body, and it has a range of activities defined under its Articles of Association. For the past hundred years this has been a dominant form of business organization in capitalist economies. The existence of companies is compatible with socialism, provided that the state sets the economic and social aims of each company.
company town
A town run by one firm, e.g. a place run by a mining company which provides all jobs, services and housing. These towns have been criticized for permitting unscrupulous firms to perpetrate many forms of exploitation, including the monopoly sale of poor-quality goods at inflated prices.
company union
A trade (labor) union dependent on the company which approves it. Only the employees of that company are permitted to be members. In the nineteenth and twentieth centuries, especially in the USA, organized labour objected to these fake unions.
comparable worth
The relative value of a worker’s labour based on productivity rather than personal characteristics. A principle adopted in Australia in 1972 and introduced in three uniform steps by June 1975 to counter SEXUAL DISCRIMINATION.
comparative advantage
The principle justifying individuals or nations specializing in those economic activities which they perform relatively better. From its first enunciation in 1815 by tor-rens, this principle has stated that a country’s pattern of production and international trade and specialization are determined by its relative efficiency in producing goods. This approach advances Smith’s doctrine of absolute advantage, which was a simple extension of his division of labour principle. Torrens and ri-cardo argued that even if country A were more productive in every agricultural and industrial activity than country B, trade would still take place if internal production cost ratios were different from country to country. Although this advanced international trade theory, it was later criticized for assuming constant costs, ignoring transport costs and for not determining the ratio at which exchange would take place. John Stuart mill, with his law of reciprocal demand, completed the theory by establishing the actual exchange rate resulting from trade.
Ricardo’s example of trade in cloth and wine between England and Portugal states that to produce a given amount of each commodity the following amounts of labour are required in each country:
| England | Portugal | |
| cloth | 100 men | 90 men |
| Wine | 120 men | 80 men |
Thus, England can produce cloth relatively more cheaply than wine and Portugal can produce wine more cheaply than cloth. The countries will both gain by increased specialization in the production of the good for which they have a comparative advantage, even though Portugal has an absolute advantage in the production of both commodities.
comparative statics
A technique of economic analysis comparing one equilibrium position with a later one which is the product of changes in the values of parameters and exogenous variables. keynes used this method; robertson and harrod preferred dynamic methods which, unlike comparative statics, have the advantage of showing how an earlier equilibrium is transformed into a later one.
compassionate conservatism
A political creed advocating the shrinking of the welfare state by using faith-based organizations to provide welfare services. This in the USA entailed the dismantling of the great society project of President Lyndon B. Johnson. President George W. Bush in his election campaign of 19992000 often referred to this philosophy of conservatism.
compensated demand curve
A demand curve constructed so that a consumer’s initial level of utility is constant because of an adjustment to his or her money income. This curve eliminates the income effect of price changes so that only the substitution effect is in force.
compensating common tariff
A tariff which keeps the rest of the world as well off after the formation of a customs union as it was previously.
compensating wage differential
A differential in wages or salaries created to compensate for a poor job attribute, e.g. a health hazard or variability of earnings. Firms grant these differentials to enable them to retain staff in undesirable jobs and to recruit new workers.
compensation principle
The rule that redistribution leads to an improvement in economic welfare if those who gain an increase in real income and welfare are able to compensate the losers and still be better off. This major principle of modern welfare economics was devised by kaldor and hicks to deal with the problem of making interpersonal comparisons of utility; it has often been applied in COST-BENEFIT ANALYSIS.
compensatory finance
Expenditures by a government to offset leakages from the circular flow of income. Thus, the impact of taxes, savings and imports which reduce the value of the multiplier for a national economy can be reduced by a government increasing its public expenditure and boosting exports through subsidizing export industries.
compensatory financial facility
An international monetary fund arrangement in force since 1963 to help with the fluctuations in commodity prices which cause a shortfall in the value of exports. Repayments are made to the International Monetary Fund over a three- to five-year period.
competition
The state of a market in which several suppliers of goods or services struggle with each other to acquire the custom of buyers. The principal types of competition are perfect, duopolistic, monopolistic and oligopolistic. Adam smith and Marshall analysed perfect competition; cournot presented a model of duopoly; chamberlin propounded a theory of monopolistic competition. Competition has often been criticized by socialists and idealists for bringing about an unfair distribution of incomes and discouraging co-operation.
Competition and Credit Control
UK discussion paper proposing new techniques of monetary policy to combine effective control over credit conditions with competition and innovation. Its recommendations included: (1) the requirement that all banks hold not less than 12% per cent of their sterling deposit liabilities in specified reserve assets, which included cash at the Bank of England, money at call, treasury and local authority bills and UK government securities with less than one year to run; (2) the placing of special deposits, variable in amount, by the banks with the Bank of England; and (3) the withdrawal of Bank of England support for the uk gilts market. These proposals were implemented in the 1970s.
Competition Commission
The UK regulatory body inaugurated in 1999 to replace the monopolies and mergers commission. It conducts inquiries referred to it on monopolies, mergers and the economic regulation of utility companies and handles appeals against the decisions of the Director-General of Fair Trading.
