Cheque To collective bargaining (Economics)

cheque

A written instruction for transferring a bank deposit from one person to another. In the nineteenth century, the cheque gradually replaced banknotes and bills of exchange as a means of settling claims. Today, cheque cards have made the cheque even more acceptable. The usage of the cheque for monetary transactions varies from country to country, being especially popular for non-cash transactions in France.

cheque card

A plastic card issued by a bank to an account-holder to guarantee a cheque up to a specified amount.

Chicago Board Options Exchange

The world’s largest options market, trading over half of the US options contracts. it was created by the chicago Board of Trade in 1973 and is subject to securities and exchange commission regulations. Originally it dealt in call options; put options were introduced in 1977. The majority of options traded are based on the standard & Poor 100 stock index.

Chicago School

A group of liberal US economists which first acquired its identity in the 1930s under the leadership of Frank knight, Jacob viner and Henry C. simons. Prominent in this group since 1950 have been Milton friedman, George stigler, Ronald coase, James buchanan and Gary becker: they share an all-embracing belief in the power of market forces to solve most economic problems and the desirability of minimizing the role of the state. They also believe that man is a rational agent constantly attempting to maximise his advantages. Recent crusades of the school have included its advocacy of a monetary policy based on rules, not discretion, and of unrestricted capitalism.


chief executive officer

The person appointed by the board of directors of a company, corporation or other organization to ensure that its decisions are implemented in its day-to-day operations and to co-ordinate the different functions of the organization. The CEO sometimes is also a director or president or chairman/woman.

Child, Sir Francis, I684?-I740

In 1721 he became head of the family banking firm Francis Child & Co.; elected Member of parliament for Middlesex in 1727 and 1734, Lord Mayor of London in 1731. He introduced promissory banknotes in 1729, thereby abandoning the GOLDSMITH BANKING SYSTEM.

Chinese modernization drive

The successor to the cultural revolution. From 1978 it attempted to achieve rapid growth of production through a ten-year plan with ambitious targets, e.g. the doubling of coal and steel output.

‘Chinese Wall’

The separation of the corporate finance department from the investment and trading departments of an investment bank (USA) or MERCHANT BANK (UK).

chi-squared distribution

The distribution of chi-squared statistics where chi is the sum of the squares of the deviations of observations from their sample mean divided by the square of the standard deviation of the population from which the sample is taken. There are different chi-squared distributions corresponding to different degrees of freedom.

choice variable

An independent variable in an objective function which an economic agent attempts to maximize or minimize. Also known as a decision variable or policy variable.

choke price

The price of a natural resource at which quantity demanded is zero.

Choquet expected utility

A valuation of the expected utility of an action over a set of potentially relevant probability models. The minimum of possible expected utilities is maximized.

Christian socialism

The intellectual and practical endeavour to apply christian social principles to an industrial and competitive society. It is particularly associated in England with Frederick Denison Maurice (1805-72) and Charles Kingsley (1819-75) who preached the merits of co-operation, promoted associations for working men and founded in 1854 a working men’s college. In the twentieth century, the fabian society and guild socialism continued the tradition; many in the UK Labour Party have attempted to marry christian ideals to socialism. In France saint-simon (17601825) recommended a new Christianity which would encourage producer associations; later in the nineteenth century there were strong Roman catholic movements to provide a theology of socialism. In the USA Washington Gladden (1836-1918) fought to make the congregational church accept its social responsibilities and inspired the Social Gospel movement. Richard Ely (1854-1943), a founder of the american economic association, expressed his christianity in his advocacy of the public control of resources and the encouragement of trade unions. The Society of christian socialists was founded in 1889. The earliest inspirations for Christian socialism were the New Testament, with its injunction ‘Love Thy neighbour as Thyself’, and the experiment of the early Church of holding all things in common. In the Middle Ages, aquinas and others recommended a just price.

Churitsuroren

National Federation of Independent Unions: this Japanese national federation of trade unions was merged with Domei in 1987 to form Rengo.

churning

1 Cancelling an existing insurance policy and purchasing a new one as a replacement.

2 Frequent changes in a portfolio of securities. Commission-hungry life insurance agents and stockbrokers often propose a rapid turnover of this kind.

circuit breaker mechanism

A price limit or trading halt used in major US stock markets. If the market drives the Standard & Poor 500 index twenty points in either direction, the trading session will be terminated. This intervention in price determination prevents fluctuations from creating excessively high prices or a price collapse such as happened in the market crash of October 1987.

circular flow

The circulation of expenditures and incomes throughout an economy, describing the relationship between households, firms, the government, the capital market and the rest of the world. (see the figure.)

circular migration

Temporary or repetitive population movement. This can be commuting or repeated movements from one’s residence to a distant place within one year.

circulating capital

working capital which is used to finance the current expenditure of a business, especially its wage bill and purchase of raw materials and energy, together with stocks of goods. smith distinguished this form of capital from fixed capital, i.e. buildings, machinery, land improvements and HUMAN CAPITAL.

Civil Rights Act 1964

US federal statute which outlawed many forms of racial and sexual discrimination. Under Title II, racial discrimination in public accommodation was forbidden; under Title vi, racial discrimination in fed erally assisted programmes was proscribed; Title VII made sexual and racial discrimination in employment illegal.

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Clark, Colin Grant, 1905-89

UK-born pioneer of national income accounting, educated at Oxford University. He was a lecturer at Cambridge University in 1931-7 before emigrating to Queensland, Australia, where in 1938-52 he was a financial adviser and Under-Secretary of State for Labour and Industry; subsequently Director of the Institute for Research in Agricultural Economics of Oxford University from 1953 to 1969. His foundational work on national income accounting included the major advance of making one of the first calculations of the multiplier. In 1940, he broadened his interests to consider the nature of economic development; also well known for his writings on population and land use.

Clark, John Bates, 1847-1938

US economist famous for the theory of marginal productivity. He was educated at Brown University, Amherst College and the University of Heidelberg. For most of his academic career, from 1895 to 1923, he was a professor at Columbia University. His major achievement, in Distribution of Wealth (1899), was to expand marginalism into the concept of marginal productivity in order to tackle problems of production and distribution. In Philosophy of Wealth (1885) he used classical economics as the foundation of his own economic theory; in Capital and its Earnings (1888) he became one of the founders of modern capital theory.

classical classical fallacy

The view that circulating capital by creating a wage fund improves wages and increases the demand for labour but fixed capital does not. samuelson asserted that this view makes the mistake of identifying the wage fund with the whole of circulating capital and ignores the contribution of fixed capital to the growth of real wages.

classical dichotomy

The view attributed to classical economists that real variables are determined by other real variables alone and monetary variables by only other monetary variables. Output and employment thus are determined by the real wage but the money supply can change the general price level without affecting relative prices. patinkin used this term to describe this theoretical stance. keynes was much concerned when advancing from his Treatise on Money to his General Theory to demolish this dualism. But with the advent of the New Classical School there has been revival of this view.

classical econometrics

Econometrics that seeks to formulate economic models to test hypotheses about appropriate data.

classical economics

The dominant school of UK economics from 1752 to 1870. David hume in his attack on mercantilism anticipated a new approach to economics but it was Adam smith in The Wealth of Nations (1776) who is credited as being the virtual founder: all subsequent writers of the school used smith as a starting point. The school was grand in its aims, providing theories of value, growth, distribution, international trade, public finance and money. All the major figures – smith, ricardo, malthus and John Stuart mill – wrote comprehensive texts, in most cases entitled ‘Principles’. Their economic liberalism was manifest in their limited view of the role of the state and in their attack on the corn laws, which were incompatible with free trade, economic growth and international specialization. Ricardo inspired marx; more recently smith has been regarded as an apostle of the new right.

classical model

A formal macroeconomic model of the economy which assumes that factor and product prices are completely flexible so that there are no rigidities to prevent market clearing. This economy will have full employment of its resources when it is in equilibrium. keynes associated this view of the economy particularly with the French economist Jean Baptiste say, although it is possible to find other classical economists, including James mill, who use similar assumptions.

class savings theory

The supposition that in a two-class society consisting of capitalists and workers only capitalists save and workers consume all of their incomes. This is an integral part of cambridge growth theories.

Clayton Act 1914

The important amendment to the US sherman act 1890 which extended federal antitrust law. It forbad price discrimination, tying arrangements and exclusive dealing, and the acquisition of another corporation’s stock if it was likely to reduce competition or lead to the creation of a monopoly; it also allowed triple damages to those suffering breaches of the antitrust law. it exempted labour unions and agricultural associations from antitrust actions.

Clean Air Act Amendments 1970

US federal statute which required the environmental PROTECTION AGENCY (EPA) to set air quality standards for specified pollutants and to issue control technology guidelines for stationary emission sources. The EPA, which attempts to control all sources of pollution, sought a 90 per cent reduction in hydrocarbon and carbon monoxide emissions by 1975.

clean float

An exchange rate regime in which market forces freely determine the value of currencies as there is no intervention by governments and central banks.

clean opinion

An auditor’s unqualified acceptance of a set of financial statements. if there is no opinion expressed the auditor issues a disclaimer of opinion.

clear income

Taxable income in excess of the amount of personal and other allowances permitted by a government’s revenue service.

clearing

1 The matching of demand and supply in a particular market.

2 The exchange between banks of the cheques drawn upon them.

clearing bank

A UK commercial bank which accepts deposits from the public and gets its name from being a member of the clearing house which ‘clears’ cheques by settling interbank indebtedness. There are separate sets of clearing banks for England and Wales, Scotland and Northern Ireland. The Scottish and Northern Irish banks also have the right to issue banknotes. A bank of this kind is distinguished from other financial intermediaries in that its reserves are the monetary liabilities of the government sector, i. e. bills, bonds and deposits with the central bank.

clearing house

The financial institution which settles the mutual indebtedness of commercial banks by clearing cheques. A bank with a net debt after the clearing to another bank will settle by drawing a cheque on its deposits with the central bank

Clearing House Interbank Payments System

New York automated clearing facility for transferring dollars between major US banks, branches of foreign banks and some subsidiaries of out-of-state banks. CHIPS, for short.

clearing market

A free market with flexible prices which quickly establishes an equilibrium between demand and supply, eliminating any excess demand or supply. Financial markets provide excellent examples.

climacteric

A critical period in the history of a country of a national economy, e.g. the UK in the late nineteenth century.

climate levy

A UK indirect tax levied as a percentage of the energy bills of firms with the hope of reducing their contribution to global warming.

cliometrics

The quantitative study of history originally carried out in the USA in studies of the profitability of slavery and the role of railroads. This elaborate econometric analysis has been applied to the study of economic growth.

clipping

Debasing a coinage made of precious metals by cutting off part of the edge of coins. This problem for monetary authorities was solved first by milling the edges and later by the introduction of token money and banknotes which had no intrinsic value to be removed.

closed economy

An economy which does not engage in international trade. There are no economies of this type in the world today but countries such as Japan were closed to foreigners for centuries. The concept is important theoretically to construct simple macroeconomic models uncomplicated by international trade.

closed-end credit

A form of credit granted on condition that the principal and charges for the loan are repaid over a specified time period.

closed-end fund

A mutual fund bought at a discount. Sales and purchases can only be made between investors thus maintaining a stable pool of investment money. The price is determined by demand and supply, not being decided by the fund managers who would base the price on net assessment value. These funds can be illiquid if few potential buyers exist and their prices can be more volatile than mutual funds.

closed pension fund

An accumulation of assets which can be used only for the payment of retirement incomes according to the set rules of a pension fund.

closed population

A population with no emigration or immigration. The size of this population will depend entirely on birth and death rates.

closed shop

An arrangement between a trade (labor) union and a management to restrict employment in a particular place of work or occupation to members of that union. A pre-entry closed shop is based on the rule that only trade union members can apply for work; in a post-entry closed shop a worker must become a member before or on joining the firm. The Trade Union and Labour Relations Act 1974 (UK) passed during the period of office of a Labour government made possible universal enforcement of the closed shop. The subsequent aim of conservative governments was to remove the pre-entry closed shop (industrial Relations Act 1971 and Employment Act 1980); the European Court in 1981 ordered the UK government to end the rail closed shop. The strongest argument in its favour is the equitable view that, as all employees benefit from a union’s bargaining, all should pay union dues. some employers have argued that a closed shop promotes harmonious industrial relations. In the USA, the post-entry closed shop is called a ‘union shop’. Even in countries such as France where the closed shop is illegal, shops of this kind still exist in the docks and in printing.

closely held corporation

A private corporation owned by only a few private stockholders, often members of the same family. Many US states have specific legislation for this type of firm.

club good

A good available to a group of individuals and hence is a mixture of private and public goods. Non-members can be excluded but a member’s consumption is not diminished by another member’s. Examples of club goods include many forms of entertainment, e.g. the cinema and sporting facilities.

Club of Rome

A group of leading economists and scientists which studied the effects of economic growth from 1968 onwards. Their study of poverty, environmental issues, urbanization, unemployment, inflation and the nature of growth led them to set out the conditions for a global equilibrium in their famous Limits to Growth report.

cluster analysis

A method of organizing data into meaningful structures. Biologists and statisticians have used different methods to achieve this goal. There is tree clustering to organise data into successively larger clusters, two-joining when clusters in two variables are simultaneously examined, and k-means clustering to see how distinctive each cluster is.

Coase, Ronald Harry 1910

Born in Willesden, England, and a graduate in commerce from the London school of Economics. After holding academic posts in Dundee, Liverpool and the London school of Economics he emigrated to the USA in 1951 to hold chairs in Buffalo and virginia before settling in chicago in 1964-79. His principal contributions to economic theory have been his analysis of the nature of the firm, which he asserted seeks to reduce the costs of participating in a market by internalizing activities, and of social cost, building on pigou to analyse the problem of pollution to take into account property rights so that the aim of environmental regulation is to maximize the value of production. His many applied studies include an examination of broadcasting, monopoly pricing and antitrust enforcement. He was awarded the NOBEL PRIZE FOR ECONOMICS in 1991.

Coase theorem

The proposition that the value and composition of the national income is unaffected by the precise pattern of liability for pollution which the perpetrators and victims have determined. Thus externalities do not lead to a misallocation of resources provided that there are no transaction costs, and property rights are clearly defined. Private and social costs will be equal under perfect competition.

Cobb-Douglas production function

An equation showing physical output as the product of labour and capital inputs. This function predicted rewards to labour and capital that were close to the observed shares of manufacturing income in national income. The Cobb-Douglas approach was dominant in the analysis of economic growth from 1945 to 1961.

cobweb

A dynamic model of the relationship between demand and supply in a particular market. central to the model is the assumption that there is a time lag between planning and completing production. A familiar application, not surprisingly, is agricultural production (particularly hog/pig production) which often has a twelve-month production period. it is assumed that (1) supply depends solely on the expected price for the product, (2) actual market price adjusts to demand so as to eliminate excess demand instantaneously, (3) expected price is equal to the previous equilibrium price, with the length of delay determined by the production lag, (4) there are no inventories and (5) neither buyers nor sellers have an incentive to speculate. Whether or not there is movement to equilibrium in the model depends on the relative elasticities of the demand and supply curves. if the elasticity of demand exceeds that of supply, there will be a movement to the original equilibrium price and output; if elasticity of supply is greater then there will be continuing disequilibrium until the elasticities change.tmp4128_thumb

coconut model

A model of a tropical island in which there is a taboo against eating the coconuts one has picked so there has to be a trade of nuts for nuts before consumption can occur. The ability to trade depends on the number of potential trading partners. There is no mechanism to ensure forecasts of the time to complete a trade. This model reflects the modern reality of producers consuming little of what they produce.

coefficient of correlation

Referred to as r by statisticians and used as a measure of the interrelatedness of two variables. This coefficient is measured by the formula

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A perfect negative relationship has the value — 1; a perfect positive relationship + 1. Values in between these extremes will depend on how strong the relationship between x and y is.

coefficient of determination

A ratio of the explained variation to the total variation of values from a regression line, usually referred to as r’. It is measured by the formula

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This ratio can range from 0 to 1, being 0 if all the variation is unexplained and 1 if all the variation is explained.

coefficient of multiple correlation

A statistic which measures the extent to which changes in a dependent variable are explained by the joint variation in the independent variables chosen to explain it. It is the square root of the coefficient OF MULTIPLE DETERMINATION.

coefficient of multiple determination

For two independent variables this coefficient, R123 is equal to 1 — s1 232/ s12, where s123 is the standard error of an estimate of variable X, on independent variables X2, and X3, and s is the standard deviation of X1.

coefficient of variation

The ratio of a standard deviation to an arithmetic mean of a set of values, usually expressed as a percentage. This is a better measure of the dispersion of a set of values than the standard deviation as it can be used for different measures with different magnitudes and can cope with two measures expressed in different units, e.g. monetary and physical.

cognitive consonance

The state of a cognitive system when ideas and beliefs are in harmony.

cognitive dissonance

The coexistence of discordant cognitions. As a consequence of this dissonance, people will avoid situations and information likely to increase such discomfort. This theory of Festinger’s, about an unpleasant state of tension, has been applied by economists to the explanation of work behaviour, home ownership and discrimination.

Cohesion Fund

European union fund created in 1993 by the Maastricht treaty to provide money for environmental and trans-European network projects in member states whose gross domestic product is less than 90 per cent of the EU average. The fund can contribute up to 85 per cent of the public expenditure on a project.

coinage

Pieces of metal of a standard size and weight stamped by a sovereign power to give them the status of money. Coins were first used as money by the Lydians (Greek inhabitants of what is now West Turkey) in the seventh century BC. The first coins were made of electrum, a natural alloy of gold and silver. Silver, bronze and copper were later used in Ancient Greece and the Roman Empire. Copper coins, used for small transactions, were issued with a monetary value in excess of the value of metal used, establishing the principle of token money, which is the nature of coinage today. The first problems of coinage, clipping and forgery, were solved by a change in production method from hammering to milling to ensure a standard size. The second problem, the inconvenience of transporting it to carry out large financial transactions, was remedied by the use of banknotes.

coincident indicators

Measures of economic activity used by economic forecasters to track cyclical movements in the economy. The main ones used are employment in non-agricultural enterprises, personal income less transfer payments. and indices of total industrial production and manufacturing and trade sales.

Colbertism

Government intervention in industry, named after the French mercantilist Jean Baptiste Colbert (1619-83) who successfully reformed the French economy after 1649. In France, the home of Colbertism, the government’s ability to subsidize industry and follow protectionist policies has been limited since entry to the European Economic Community in 1958.

collaborative production

A form of workplace organization which decentralizes production. This reaction to taylorism can take many forms, including TEAM WORK and QUALITY CIRCLES.

collar

A combination of a cap and a floor to give an interest rate a fixed range.

collateralized mortgage obligation

A bond based on a portfolio of mortgages with interest and capital repayments paid by the original mortgagors.

collecting bank

Any bank, other than the payer bank, handling a bank item, e.g. a cheque, for collection.

collective bargaining

Negotiations between a trade (labor) union and a single employer or employers’ association over pay, working conditions and other employment matters. it can only be genuine if the parties are free to initiate discussions and reach a settlement: under incomes policies, and in countries where trade unions have little independence from the state, this is not possible. it is usually bilateral, but sometimes other interested parties are at the bargaining table, e.g. in some US teachers’ negotiations where parents are represented. it can take place at different levels – national, industrial, the firm or workplace. The level at which the major decisions are made distinguishes one country’s system sharply from another. In Japan, the enterprise level is very important; in Germany, the industrial level. In the USA, the parties produce a legally enforceable contract; in the UK, a framework for individual employment contracts.

Collective bargaining makes possible the collective provision of workplace ‘public goods’, e.g. safety, conditions, lighting, heating, speed of the production line, grievance procedures, pension plans. It permits the individual to express his or her own preferences without the danger of being sacked. Also it helps to change the social relations of the workplace, bridging the gap between labour and capital, by making possible the enforcement of labour contracts.

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