ECONOMIC LAWS
The study of economics, founded as a separate academic discipline in the 18th century, is an inexact science - largely because complex patterns of human behaviour have to be reduced to gross simplifications to enable economists to analyse them. Nevertheless, some general observations are known as laws.
Law of Diminishing Returns. That if one factor of production - staff, say - is continually increased while the others remain constant, eventually the point is reached where each new unit of increase brings a smaller addition to production than the previous one. In a car cruising in top gear, for instance, each additional litre of petrol (gas) used produces a smaller and smaller increase in speed, so that a car cruising at 100km/hr (58 mph) uses more than twice as much petrol as a car travelling at 50km/hr (29 mph). Also known as the Law of Variable Proportions.
Gresham's Law. That 'bad money drives out good'. Or, that debasing the metal content of coinage lowers the value of money, since owners of unadulterated coins tend to hoard them or melt them down to purchase a greater number of debased coins. Attributed, with no foundation, to Elizabeth I's financial adviser, Sir Thomas Gresham. Probably first stated by the Polish astronomer Nicolaus Copernicus.
Iron Law of Wages. That if wages rise above subsistence level, they produce a higher birthrate and expand population, which in turn forces wages down to subsistence level again. Given wide currency by British economist David Ricardo, but French origin. Not now accepted, since in the 20th century wealthy nations have in practice tended to have lower birthrates than poor nations.
Parkinson's Law. That work expands to fill the time availasble to do it. Or, that the amount of work done varies inversely to the number of people employed. Humorously (but still seriously) published by the British economist Cyril Northcote Parkinson in 1958.
Peter Principle. That in any organisation every employee rises to his level of incompetence. All valuable work is therefore done by people who have not yet reached that level. Another satirical law, published by a Canadian-born author, Professor Lawrence J. Peter, in 1969.
Say's Law. That every rise in the supply of goods produces an increase in demand for them. Stated by the French economist Jean-Baptiste Say in 1803. True only for barter economies, but generally believed until the Great Depression.
Law of Supply and Demand. That competition between consumers and producers brings the supply of goods and the demand for them into balance. Cardinal 'law' of free-market economic theory. Overproduction lowers prices, increasing demand; over consumption raises prices, reducing demand.

This page hosted by Get your own Free Home Page