tender
1 A method of selling shares by which prospective buyers specify the price at which they are willing to buy.
2 Direct sale of government securities.
3 A method of fixing the price of a contract often used in the construction and heavy engineering industries.
1040 (‘ten forty’)
1 The basic tax form used in the USA for individuals and families to report their personal incomes. A taxpayer first calculates his or her adjusted gross income, subtracts a standard deduction (personal exemptions) and then deducts tax credits. Persons with lower incomes and no deductions against tax use a simplified version of this form.
2 A US government bond redeemable at the option of the government after ten years but only has to be paid up after forty years.
Tennessee Valley Authority
A public corporation established in 1933 and owned by the US federal government. its tasks include flood control, wholesale power supply to parts of seven states, economic development of tourism and natural resources, and job training. it receives appropriations from the US Congress to finance its activities, apart from its self-financing power programme.
tenure profile
A description of a firm’s labour force showing the proportions of it with different lengths of service.
terminal bonus
A bonus given by an insurance company to the policyholder at the time when an insurance policy matures.
term premium
The difference between the yields of fixed income securities of different maturities not attributable to current or anticipated future levels of short-term interest rates. Expected returns on exogenous securities, the quantity of extant securities, the distribution of asset holdings and the flows of new wealth across different classes of investors, classified according to their attitude to risk, have all been suggested as determinants of these premiums.
terms of trade
1 The ratio of the values of the goods and services traded between countries.
2 The weighted or unweighted ratio of export price indices to import price indices.
As changes in the terms of trade have so great an effect on the gross national product of open economies there are many policy responses to deteriorating terms. These include changing the underlying bargaining relations in international trade, the collective self-reliance of less developed countries in trade and investment, import substitution and changes in types of export. some studies suggest that the deterioration in the terms of trade has been more the result of the characteristics of countries than of commodities.
The best measures of the terms of trade have been the international monetary fund’s index of thirty primary commodities exported by less developed countries deflated by the united Nations’ index and the world bank’s indicators of market prices divided by a unit value index of total manufactures exported from developed market economies to less developed countries.
terms of trade argument
A reason for protection. A large country by imposing a tariff, quota, or export tax can obtain imports at lower relative prices
term spread
The difference between a long-term and a short-term interest rate.
term structure of interest rates
The relationship between interest rates on securities of different maturities, particularly the relationship between short- and long-term interest rates. Economists, including hicks, have attempted to explain this structure in terms of expectations; others have attributed the structure to the attitudes of borrowers and lenders to liquidity and risk or to market segmentation that prevents funds being shifted from short-term to long-term markets. Long-term interest rates are often more than short-term rates as many investors cannot lend long term and so have to be paid a premium to be encouraged to lend.
tertiary sector
That part of an economy producing services. The formal part of this sector is dominated by schools, hospitals, retailing, banks and insurance; the informal part is dominated by self-employed persons in the black economy. In the USA and the UK, as a consequence of de-industrialization, it has become, as measured by employment, the major sector of the economy.
test rate of discount
The real rate of return that uK public sector investments are expected to achieve at the margin. The uK government, in its continuing attempts to improve investment appraisal in nationalized industries, proposed this rate in a White paper of 1967. it was originally set at 8 per cent, to represent ‘the minimum rate of return to be expected in a marginal low-risk project undertaken for commercial reasons’ with the hope that there would be greater consistency in the granting of approval for projects. it has subsequently been changed to reflect market changes in interest rates.
test statistic
The distribution of a standardized variable, also known as a z score. For a normal distribution the z score is the statistic minus the mean of the sample all divided by the standard deviation of the sample.
Thatcherism
An attitude of frugality towards public expenditure and a belief in the supremacy of market forces. Mrs Margaret Thatcher in 1970 as UK Secretary of State for Education, by abolishing free school milk, gained the former reputation; as Prime Minister of the UK from 1979 to 1990, her emphasis on monetary control (instead of extensive government intervention backed by public funds), on the privatization of nationalized industries and on the removal of labour market rigidities expressed her desire to unleash free market forces. she frequently used the analogy of good household management for such policies and is thus the contemporary expounder of Gladstonian finance. sir Geoffrey Howe in his first Budget speech of 1979 outlined the programme of Thatcherism in his four principles: the strengthening of economic incentives, the reduction of the burden of financing the public sector, the reduction in the role of the state to increase freedom of individual choice and increased responsibility in collective bargaining. In practice monetarism was short-lived and public spending prodigal in many years.
theonomy
1 The application of biblical theology, especially the Law of Moses set out in the Old Testament.
2 A form of christian reconstruction especially applied to the economy.
theory of clubs
An explanation of the nature of club goods sharing some of the characteristics of public goods without non-excludability. This theory can be traced back to pigou and knight; recent writers on this subject include buchanan and Tiebout.
theory of the firm
An explanation of how the aims of a firm are related to its decision making. since Marshall, economists have studied the rationale for managerial decisions on pricing, product mix, output, advertising and investment. Earlier theories were built on the assumption of profit maximization; later theories have attempted to incorporate wider theories of managerial behaviour and to recognize different organizational forms. The theory of the firm constitutes a major part of microeconomics.
theta
The ratio of the change in the price of option to the decrease in time to expiration. Also known as time decay.
thin trading
Little trading of a security or other marketable item. A low turnover of a security, or of the market as a whole, indicates thinness. A consequence will be a divergence between the observed and true values of beta.
third age
The period of a person’s life from the age of 50 years. This age group has a dominant role in many consumer markets of industrialized countries in the late twentieth century.
third-degree price discrimination
Charging different prices to different customers. This is the most common form of price discrimination. Discrimination is often on the basis of the income, age, student or unemployed status of the consumer.
third market
The UK stock exchange founded in January 1987 to allow the trading of small companies’ securities. The first and second markets consist of the main list of the INTERNATIONAL STOCK EXCHANGE and the UNLISTED securities market. As the companies using this market are small, and often new, investment in their shares is very risky. Nevertheless, it is a market with great growth potential, partly because of the companies promoted by the business expansion SCHEME.
Third World
Developing economies apart from oil producers, with low per capita incomes, large agricultural sectors and a shortage of most kinds of capital. Some have defined the Third World as those countries in receipt of FOREIGN AID.
Thomson Report
Report on the Regional Problems in the Enlarged Community, a report of a European community Commissioner in 1973 which surveyed the economic and social problems of the member countries on the eve of the first oil crisis.
Thornton, Henry, 1760-1815
London banker and leading monetary theorist of the early nineteenth century who was a member of the clapham sect, a group of Evangelical social reformers who succeeded in abolishing British participation in the slave trade. Member of parliament for Southwark from 1782 to 1815. His famous topic Paper Credit (1802), much praised by schumpeter, hayek and hicks, defended the issue of inconvertible banknotes, showed the relationship be tween interest rates and international gold flows, analysed the market for loanable funds, defined the nature of inflation and presented a definition of full employment.
threat effect
Effect on the wages of a non-unionized labour force of the threat of a trade (labor) union organizing to raise wages. A non-unionized employer wanting to prevent unionization raises wages to the union level. Threat effects contribute to the spread of wage inflation.
three-digit industry
An industry defined according to a fine classification such that the economy’s industrial structure is broken down into as many as 999 industries.
three-stage least squares
A rewriting of two-stage least squares estimators and the application of generalized least squares to all the relations in the model to obtain a simultaneous estimate of all parameters.
threshold population
The minimum size a population must be to carry out the functions of a town or city. A major determinant of this size will be AGGLOMERATION ECONOMICS.
thrift
1 Excessive saving. In keynesian economics thrift is attacked because a hoarding of income lowers aggregate demand.
2 A mutual savings bank or savings and loan association (USA), similar to a UK building society through providing mortgages. In the 1980s, the US thrifts went further into insolvency as a consequence of financial deregulation, including the ending of regulation q and the diversification of their investments; lax supervision and the guaranteeing of deposits contributed to poor financial control.
3 Careful management of resources.
Thunen, Johann Heinrich von, 17831850
A Prussian landlord who can be credited with creating marginalism and managerial economics and presenting one of the first general equilibrium models and models of locations.
tick
one thirty-secondth of a percentage point, especially of the interest rate of UK gilts.
Tiebout hypothesis
The view that there should be small local government areas in order to increase the amount of citizen choice between different combinations of facilities and local taxes. individuals would be able to obtain the combination closest to their preferences by moving between these small areas.
tied aid
Foreign aid given on condition that the recipient purchases the exports of the donor country. This has been called ‘devalued aid’ as the recipient may have to purchase goods higher in price and lower in quality than are available on international markets; in extreme cases the aid is supplied in physical amounts, e.g. food and medicines. However, many donor countries with their own balance of payments problems would give little aid at all if it were not in this form.
tied cottage
A house provided to a worker holding a particular job, especially in the agricultural sector. when the worker ceases to hold that job, he or she has to seek alternative accommodation.
tied house
In the UK brewery industry, a public house (inn) which can only sell the products of the brewery to which it is connected, usually by ownership.
tight fiscal policy
Low government expenditure, high taxation or both.
tight monetary policy
A strict monetary policy attempting to curb the growth of the money supply and raising interest rates. This policy is often employed by economies with an unacceptable rate of inflation and/or balance of payments problems. These goals are sought by reducing aggregate demand and inducing capital inflows from other countries.
till money
The cash that UK clearing banks have on their premises for payments to customers. Until 1971 it could be included in the reserve assets of these banks: it was excluded then as cash needed for transactions purposes could not be regarded as a reserve.
time budget survey
An investigation into the allocation of time between paid work, unpaid work (e.g. household cleaning) and leisure which aims to discover the range of a person’s activities. Data are collected from the diary entries of volunteers. surveys of this kind have been used to assess the extent of the informal economy and to measure labour FORCE PARTICIPATION RATES.
time deposit
A sum of money that the depositor does not have the right to withdraw within six days of making the deposit, unless the deposit is subject to an early withdrawal penalty of at least seven days’ simple interest.
time rate
A wage rate per unit of time, often an hour.
time series
A collection of data showing the values of an economic variable at different dates, e.g. expenditure on clothing for each year of a decade. Movements of time series can be divided into secular (long term), cyclical, seasonal and random changes.
timeshare
The property right to use a house or apartment, usually for holiday purposes, for specified weeks of a year, either over a fixed term of years or in perpetuity. The right can be bought and sold. Timesharers often have to pay an annual maintenance charge to the firm organizing these properties.
time span
The amount of time an employee can work without reporting to his or her immediate superior. These spans have been used as a proxy measure of all the attributes of a job giving rise to occupational pay differentials. Elliott Jaques extensively applied this to the rationalization of organizations’ pay structures, e.g. at Glacier Metals (uK) and Honeywell Computers (USA).
time value of money
The enhanced value of money arising from it being invested at interest over a time period.
Tinbergen, Jan, 1903-94
Prominent Dutch econometrician who, after studying physics at Leiden university and gaining a phD for a thesis on extre-mum problems in economics and physics, conducted business cycle research from 1929 to 1945 at the Dutch Central Bureau of statistics. He was Director of the Netherlands central planning Bureau from 1945 to 1955, Professor of Development planning at Erasmus university,
Rotterdam, from 1955 to 1973, and Professor of International Co-operation at Leiden from 1973 to 1975. With frisch, he won the first nobel prize for economics in 1969; four years later his brother shared the Nobel prize for Medicine. His skills as an econometrician yielded many topics, directly arising from the jobs he held. His first works were on business cycles but his experience with the central planning Bureau produced renowned works on economic policy that asserted that government policy must have the same number of instruments as it has quantified targets. Later he turned to development economics and the study of income distribution.
tit-for-tat strategy
The behaviour of a firm which deliberately imitates the initial strategy of its rivals.
Tobin, James, 1918-2002
US economist educated at Harvard university and an economics professor at Yale university since 1947; in 1981 he was awarded the nobel prize for economics. A prominent keynesian who has attacked the narrowness of monetarism with his wider portfolio selection theory. In a paper on liquidity preference in 1958, he extended Keynesian analysis by asserting that liquidity preference is a response to the risk associated with the probability distribution of interest rate expectations. in many papers, he has repeatedly used a general equilibrium approach to a study of financial intermediation and flow of funds analysis. In 1961-2 he served on President Kennedy’s council of economic advisers. His wide-ranging interests include stabilization policies, growth policies and the poverty problem. He originated the tobit model method.
Tobin’s Q
The ratio of the market value of a firm’s assets to their replacement value. This is the driving force of investment decisions according to Professor James Tobin of Yale University.
Tobin tax
A proposed uniform tax levied by all countries of the world on all foreign exchange transactions with the aim of making short-term hot money movements unprofitable.
Tobit model
An econometric model which copes with the problem of missing data in the form of a shortage of observations beyond a limit point, e.g. zero, so that there are no negative values. tobin was the first to tackle this problem in his analysis of household expenditure on a durable good.
token money
Anything accepted as money, not because of its intrinsic value, but because of custom or legal enactment. Thus banknotes are token money and gold coins are not. Token money costs less to produce than its face value, e.g. a pound note in the UK costs only several pence.
Tokyo Round
A series of tariff cuts arranged under the auspices of the general agreement on tariffs and trade in the period 1973-9. Tariff reductions were to be implemented in equal annual amounts from 1980 to 1987. A duty of 20 per cent was reduced by 59 per cent, a 10 per cent duty by 42 per cent and a 5 per cent duty by 26 per cent. The european community and Japan made advance reductions; other countries by 1990. it was the intention that in this round tariff averages weighted by total imports of manufactured goods would decline by 30 per cent in the USA, 28 per cent in the European community and 46 per cent in Japan. smaller reductions in tariffs of goods from developing countries (as in the Kennedy round) were agreed as they are sensitive products, e.g. textiles. At the end of the round, tariffs on manufactured goods, weighted by total imports, were to be cut by 4.9 per cent in the USA, 6 per cent in the European community and 5.4 per cent in Japan.
toll
The charge for the use of a service; in some cases an excessive charge. Major examples of tolls are those for the use of highways and a telephone system to make long-distance calls.
toll model
Okun’s model of a labour market in which a firm hiring a worker has to pay a ‘toll’ to cover the costs of training and initiation. This model is used to explain cyclical variations in employment and unemployment.
tombstone
A press advertisement recording the details of a new issue or loan. The names on the tombstone are the managers and underwriters (or syndicate members) to the issue. The amount of the loan and the listing terms are also given.
tontine
A scheme, invented by Lorenzo Tonti, a Neapolitan banker, in 1653, consisting of several subscribers advancing the same amount to a borrower who pays the same amount of interest in total to all the subscribers until the survivor receives all the interest on the amount advanced. Thus if there are 100 subscribers receiving £50 each in interest, when there are only 50 left each subscriber will obtain £100 each and the survivor will receive £5,000 per annum. This popular method of raising funds in the eighteenth and nineteenth centuries was last used by the British government to raise a loan in 1789. One of the most amusing accounts of a tontine is given in Robert Louis Stevenson’s short novel.
