These terms will help readers understand fundamental concepts within the subject.
Glossary /{Terms and Definitions}
Glossary Page 1
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1. Political Economy
The interdisciplinary study that examines how political institutions, the political environment, and the economic system (capitalist, socialist, or mixed) influence each other. Political economy looks at how government policies affect economic performance and how economic interests shape government decisions.
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2. Capitalism
An economic system where private individuals or businesses own the means of production (such as factories, machinery, and capital) and operate for profit. The government’s role in capitalism is generally limited to regulation and maintaining the rule of law, with markets playing a primary role in distributing resources.
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3. Socialism
An economic and political system in which the means of production are owned and controlled collectively, often by the state, with the goal of distributing resources more equitably among the population. Socialism advocates for public ownership or extensive state regulation of key industries to promote social welfare.
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4. Democratic Socialism
A political ideology that advocates for democratic control over the economy combined with the principles of socialism. It supports a balance between market-driven economic activity and public ownership, emphasizing social welfare, worker’s rights, and equitable distribution of wealth through democratic means.
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5. Neoliberalism
A political and economic ideology that emphasizes free-market capitalism, deregulation, and a reduction in government spending. Neoliberalism advocates for privatization, minimal government intervention in the economy, and open international trade and finance markets.
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6. Keynesian Economics
An economic theory named after British economist John Maynard Keynes, which argues that government intervention in the economy is necessary to manage aggregate demand, especially during periods of recession. Keynesian policies often include public spending and taxation to stimulate economic activity.
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7. Fiscal Policy
Government policies related to taxation and spending. Fiscal policy is used to influence the economy by adjusting government revenue (taxes) and expenditure (spending) to either stimulate growth (during a recession) or cool down an overheated economy (to avoid inflation).
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8. Monetary Policy
The process by which a central bank, such as the Bank of England, manages the supply of money and interest rates to control inflation, stabilize the currency, and achieve economic growth. Common tools include adjusting interest rates and conducting open market operations.
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9. Austerity
Government policies aimed at reducing public sector debt by cutting government spending, increasing taxes, or a combination of both. Austerity measures are often introduced during times of financial crisis to restore fiscal discipline, but critics argue they can exacerbate economic inequality and lead to reduced public services.
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10. Public Goods
Goods or services provided by the government or a collective entity, which are non-excludable and non-rivalrous. This means that individuals cannot be excluded from using them, and one person’s consumption does not reduce their availability to others. Examples include clean air, public parks, and national defense.
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11. Welfare State
A government system that provides social insurance and assistance programs to protect citizens from economic risks such as unemployment, illness, and poverty. The welfare state is based on principles of equality and social solidarity, often funded through progressive taxation.
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12. Globalization
The process by which economies, societies, and cultures become interconnected through international trade, investment, technology, and migration. Globalization affects the political economy by integrating markets and increasing the interdependence of nations.
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13. Trade Liberalization
The process of reducing barriers to trade, such as tariffs, quotas, and regulations, to promote free trade between countries. Trade liberalization is intended to increase market access and competition, although it may have unequal impacts on different sectors and economies.
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14. Public Choice Theory
A branch of economics that studies how political decision-making affects economic policies. Public choice theory applies economic principles to the analysis of political behavior, particularly in relation to government officials, bureaucrats, and voters.
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15. Rent-Seeking
An economic concept where individuals or organizations seek to increase their share of existing wealth without creating new wealth. Rent-seeking often involves using political influence to secure favorable government policies, subsidies, or monopolies, which can distort the economy.
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16. Development Economics
A field of economics focused on improving the economic conditions of developing countries. It studies the structural issues hindering development and proposes strategies to promote economic growth, reduce poverty, and enhance living standards.
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17. Economic Inequality
The unequal distribution of income, wealth, and opportunities among individuals or groups in a society. Economic inequality is often a central issue in political economy, as it can lead to social unrest, political instability, and reduced economic growth.
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18. Market Failure
A situation in which free markets fail to allocate resources efficiently, leading to negative outcomes such as monopolies, environmental degradation, or under-provision of public goods. Government intervention is often necessary to correct these failures.
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19. Comparative Advantage
An economic principle developed by David Ricardo that explains how countries or individuals can benefit from specializing in the production of goods or services they can produce most efficiently, and then trading with others. Comparative advantage forms the basis for international trade.
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20. Supply-Side Economics
An economic theory that argues that reducing taxes, deregulating industries, and promoting free-market policies will lead to increased production, job creation, and economic growth. Supply-side economics emphasizes the role of producers, particularly businesses, in driving economic activity.
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21. Labor Market
The arena in which workers sell their labor and employers buy labor to produce goods and services. Political economy studies labor markets to understand wage determination, employment rates, and how government policies affect workers’ rights and conditions.
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22. Externalities
Costs or benefits of an economic activity that are not reflected in the market price and are borne by third parties or society at large. Positive externalities, like education, benefit others, while negative externalities, like pollution, harm others.
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23. Social Democracy
A political ideology that advocates for political democracy alongside social justice within a capitalist framework. Social democracy seeks to balance market-driven economic growth with government intervention to reduce inequality and provide social welfare programs.
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24. Nationalization
The process by which a government takes control of private assets or industries and brings them into public ownership. Nationalization is often implemented to ensure that essential services, such as healthcare, utilities, or transportation, serve the public good rather than profit motives.
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25. Privatization
The transfer of ownership of a business, service, or industry from the public sector (government) to the private sector. Privatization is often promoted to improve efficiency and reduce government debt, though critics argue it can undermine public welfare.
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26. Industrial Policy
Government-led strategies designed to promote specific sectors of the economy or industries considered essential for national economic growth and stability. Industrial policies may include subsidies, tax incentives, or protective regulations.
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27. Inclusive Growth
An economic concept that emphasizes not just growth in GDP, but also equitable distribution of the benefits of growth across all segments of society. Inclusive growth aims to reduce poverty, inequality, and social exclusion.
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28. Fiscal Deficit
The gap between a government’s expenditures and its revenues, leading to borrowing to cover the shortfall. A fiscal deficit is often a point of debate in political economy, as excessive borrowing can lead to debt, while cutting spending may hurt social programs.
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29. Structural Adjustment Programs (SAPs)
Economic policies imposed by international financial institutions such as the International Monetary Fund (IMF) and the World Bank on developing countries, usually as a condition for receiving loans. SAPs typically involve austerity measures, trade liberalization, and privatization.
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30. Green Economy
An economic model that aims for sustainable development without degrading the environment. It emphasizes renewable energy, energy efficiency, and low-carbon technologies, seeking to balance economic growth with environmental sustainability.
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