Archives: Terms

Definition of Sectoral Balances Sectoral balances are a framework derived from the national accounts, illustrating how the three main sectors of an economy (the domestic private sector, the government sector, and the foreign sector) interact financially. It’s based on the identity that states that the sum of the surpluses or […]

Definition of Scitovsky Paradox The Scitovsky paradox, named after the economist Tibor Scitovsky, refers to a situation in welfare economics where a change that makes at least one individual better off without making anyone else worse off (a Pareto improvement) can be reversed by another change that also constitutes a […]

Definition of Say’s Law Say’s Law, also known as the law of markets, is a principle attributed to the 19th-century French economist Jean-Baptiste Say. The law suggests that “supply creates its own demand.” In other words, Say proposed that the production of goods and services within an economy creates a […]

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Definition of Saving Saving refers to the portion of income that is not spent on consumption or immediate needs. It embodies the concept of deferred consumption, whereby individuals, households, or entities set aside resources to be used in the future. Savings can be held in various forms, such as cash, […]

Definition of Saltwater Economics Saltwater Economics refers to a school of economic thought associated primarily with economists from the coastal universities on the East and West Coasts of the United States, notably Harvard, MIT, UC Berkeley, and Stanford. This school is often contrasted with the “Freshwater Economics” of the inland […]

Definition of the Salamanca School The Salamanca School refers to a renaissance of thought in economics, philosophy, and theology, centered around the University of Salamanca in Spain during the 15th and 16th centuries. This school of thought is significant for its early contributions to the development of modern economic theories, […]

Definition of Rybczynski Theorem The Rybczynski theorem, named after the Polish economist Tadeusz Rybczynski, is a fundamental concept within international economics, specifically in the study of trade theory. It posits that at constant world prices, an increase in the endowment of one factor of production (let’s say labor or capital), […]

Definition of Roy’s Identity Roy’s Identity is a fundamental concept in microeconomics, particularly in consumer choice theory. Named after the French economist René Roy, this mathematical result links consumer demand functions to the utility function that they derive from. Specifically, it provides a method to derive individual demand curves for […]

Definition of the Roy Model The Roy model, named after the economist Donald Roy, is a foundational framework in labor economics that studies how individuals select occupations based on their skills and the potential earnings in different professions. The model assumes that individuals have varying abilities and that they choose […]