Google
Monday 
December 10, 2018 

AmosWEB means Economics with a Touch of Whimsy!

AmosWEBWEB*pediaGLOSS*aramaECON*worldCLASS*portalQUIZ*tasticPED GuideXtra CrediteTutorA*PLS
ACTUAL INVESTMENT: Investment expenditures that the business sector actual undertakes during a given time period, including both planned investment and any unplanned inventory changes. This is a critical component of Keynesian economics and the analysis of macroeconomic equilibrium, which occurs when actual investment is equal to planned investment. The difference between planned and actual investment is unplanned investment, which is inventory changes caused by a difference between aggregate expenditures and aggregate output. Should actual and planned investment differ, then aggregate expenditures are not equal to aggregate output, and the macroeconomy is not in equilibrium.

Visit the GLOSS*arama


FIFTH RULE OF IMPERFECTION:

The fifth of seven basic rules of the economy, stating that the real world is not perfect, especially in terms of achieving an efficient allocation of resources. This rule means that markets often fail to achieve due to market failures, and that governments seldom satisfactorily enact the policies needed to correct market failings. As such, the real world is often faced with the lesser of two evils--imperfect markets or imperfect government.
This rule stems from the observation that the real world is populated by imperfect humans. These imperfect humans make imperfect decisions when participating in imperfect markets or when part of imperfect governments. The result is that the real world is, at best, only able to approximate the theoretical ideals of economics. The challenge is to recognize the imperfections and seek a balance that achieves the best possible outcome.

Market Imperfections

Two notable problems in the market category of imperfection are market control and externalities.
  • Market control comes about when one side of the market has relatively more ability to influence the market exchange process, especially determining the price, than the other side. Such control typically results from the lack of competition. Monopoly is one noted example of market control exerted by the selling side of the market. Monopsony is a counter example of market control by the selling side.

  • Externalities are a market imperfection that result because the cost or benefit of a market exchange affects people with no direct involvement. These costs or benefits are, in other words, external to the market. Pollution is a typical textbook illustration of an externality. The market for chemicals is based on decisions made by chemical users (buyers) and chemical producers (sellers). However, if waste products from the production of chemicals enter the environment, causing problems for local folks who breath the air or drink the water, then the result is a cost external to the market..
In both examples of market imperfections, the market fails to efficiently allocate resources. Government intervention is required to achieved efficiency.

Government Imperfections

Unfortunately, this fifth rule of imperfection also applies to government. While government is often looked to as the solution to market failures, it too is flawed. Four key government failings are special interest groups, apathetic voters, vote-seeking politicians, and bureaucratic inefficiency. Special interest groups, apathetic voters, and vote-seeking politicians guarantee that government leaders do not necessarily enact the best, most efficient economic policies. Then complex bureaucracies tend to prevent the chosen policies from being implemented correctly.

It is a sad, imperfect world in which we live. However, the biggest failing is to naively expect perfection to emerge from this hodge-podge of imperfection.

<= FIAT MONEYFINAL GOODS =>


Recommended Citation:

FIFTH RULE OF IMPERFECTION, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2018. [Accessed: December 10, 2018].


Check Out These Related Terms...

     | seven economic rules | first rule of scarcity | second rule of subjectivity | third rule of inequality | fourth rule of competition | sixth rule of ignorance | seventh rule of complexity |


Or For A Little Background...

     | laissez faire | free enterprise | conservative | liberal |


And For Further Study...

     | mixed economy | economic goals | efficiency | allocation | four estates | government functions | political views | monopoly | monopsony | market control |


Search Again?

Back to the WEB*pedia


APLS

ORANGE REBELOON
[What's This?]

Today, you are likely to spend a great deal of time watching infomercials wanting to buy either rechargeable batteries or a rechargeable battery for your computer. Be on the lookout for empty parking spaces that appear to be near the entrance to a store.
Your Complete Scope

This isn't me! What am I?

Two and a half gallons of oil are needed to produce one automobile tire.
"The greatest barrier to success is the fear of failure."

-- Sven Goran Eriksson, writer

ADR
American Depositary Receipt, Asset Depreciation Range
A PEDestrian's Guide
Xtra Credit
Tell us what you think about AmosWEB. Like what you see? Have suggestions for improvements? Let us know. Click the User Feedback link.

User Feedback



| AmosWEB | WEB*pedia | GLOSS*arama | ECON*world | CLASS*portal | QUIZ*tastic | PED Guide | Xtra Credit | eTutor | A*PLS |
| About Us | Terms of Use | Privacy Statement |

Thanks for visiting AmosWEB
Copyright ©2000-2018 AmosWEB*LLC
Send comments or questions to: WebMaster