labor:

Labor services are usually measured as the total amount of time people worked or would like to have worked during a given interval. Click on the link on resources for more information on labor.

labor abundant:

A nation is labor abundant if it has less capital per worker (a low K/L ratio à a high L/K ratio) than other nations. According to the Heckscher-Ohlin model, a labor abundant: country such as Indonesia will export labor intensive goods. See also capital abundant.

labor contract:

Labor contracts, whether written (explicit) or unwritten (implicit), are legal agreements by which wages and benefits are set for relatively lengthy periods. Labor contracts for large numbers of workers are often negotiated between labor unions and firms, and do adjust to changes in economic conditions, but only after a lag. Contrast with spot market.

labor force:

The labor force is measured as the sum of all employed and unemployed civilians and military personnel in the US over the age of sixteen. Thus, LF = E + U.

labor force participation rate:

A labor force participation rate (LFPR) is the proportion of a population or sub-population in the labor force and is computed by dividing the relevant labor force by the relevant population. For example, an LFPR might be computed for women with children ages 6 to 13, or for the entire population of a country or region. See also turnover rate.

labor force turnover rate:

The labor force turnover rate is the sum of the rates of layoffs, quits, retirements, and discharges [firings] as percentages of the labor force.

labor intensive:

A good for which efficiency in the production process requires relatively less capital than labor (a lower K/L ratio) than some other good is described as a labor intensive good. A good efficiently produced with relatively more capital and less labor (a higher K/L ratio) is described as a capital intensive good. The relative factor (resource) intensities of alternative goods and the relative factor abundances of nations are the foundations of the Heckscher-Ohlin model of international trade.

labor market:

Labor market funtion through the interaction of workers and employers.

labor theory of value:

The philosopher John Locke asserted that property rights originate when one’s labor is mixed with natural resources. The labor theory of value evolved from Locke and is the idea that the value of anything is exactly proportional to the labor time socially necessary for its production. This approach was the standard economic explanation of price until late in the 1800s and is still an article of faith among Marxists.

labor unions:

Labor unions are worker organizations that negotiate labor contracts with firms’ managers to set wages and the conditions of work.

labor-saving technological advance:

A “labor-saving technological advance” refers to a technological improvement that reduces the optimal capital-to-labor ratio [K/L] while increasing the value of output producible from given amounts of labor and capital. These advances are synonymous with automation, which occurs when production processes are increasingly mechanized, consequently reducing the demand for human labor in that particular production process. However, automation increases aggregate income and usually increases real wages because of increased labor productivity and increased demands for labor in other sectors of an economy. For example, mechanization of U.S. agriculture reduced the demand for farm workers, but increases in national income increased real wages in the industrial sector, and across generations, workers left family farms and developed more productive skills. This process can, however, be very disruptive to displaced workers and their families. See also churning.

Laffer curve:

A Laffer curve is a graph suggesting that very high tax rates may so discourage productive efforts that fewer tax revenues are collected than if tax rates were substantially lower. The concepts underpinning the Laffer curve have been traced back to some hieroglyphic writings of advisers to Egyptian pharaohs.

lagging economic indicator:

A lagging economic indicator is a variable that changes in a reasonably systematic way when the overall state of the economy changes, but the highs and lows of lagging economic indicators are experienced after the overall economy has hit its highs and lows. See also leading economic indicator and coincident economic indicator.

laissez-faire:

The laissez faire philosophy embraces the notion that a market system operates most efficiently when government minimizes its activity in the economy; according to this philosophy, governments should provide national defense and police protection, specify property rights, and enforce contracts drawn up between economic agents‑and little or nothing else. See also capitalism, socialism. Click on the link for further exploration into laissez faire and central planning policies

land:

The traditional economic definition of land encompasses all natural resources, including unimproved land, energy, water, air, minerals, timber, wildlife, and fertility of the soil. Payments for the use of land are rent. Click on the link on resources for more information on labor.

land reform:

Land reform is the governmental redistribution of land (primarily large agricultural estates), usually following a marked change in government, so that land is taken from its rich owners and given to the people who work directly on the land.

land tax:

A land tax is a tax on the value of land or a proportion of the rental income from land, and not a tax on any improvements to land. A land tax has almost no effect on rental rates for land relative to other resources or goods because the supply of land is perfectly elastic and thus, such taxes are relatively neutral. The pioneering economic reformer Henry George proposed a land tax to replace all other taxes.

Laplacean demon:

Pierre-Simon, Marquis de Laplace [1749-1827], a renowned mathematical astronomer and philosophic materialist, hypothesized that if a creature, now called the Laplacean demon, knew the location of all matter in the universe and if it understood all physical and chemical laws of nature, then the creature would know perfectly all of the past, and would be able to perfectly predict every aspect of the future. The Laplacean demon is also known as Maxwell’s demon. See also materialism.

large numbers:

See law of large numbers.

Laspeyres index:

In a Laspeyres price index, the market basket of goods for which changes in prices are to be indexed is set in the base year. This initial market basket determines item weights. The base year index is set at 100. Then consumer costs in other periods for this constant market basket are calculated. These costs, relative to the base year value of 100, are the values of the Laspeyres index for each year.

law of comparative advantage:

See comparative advantage, law of.

law of demand:

The law of demand asserts that, all else being equal, consumers buy less of a good during a given period if its relative price is higher, and more if its relative price is lower.

law of diminishing marginal returns:

The law of diminishing marginal returns is the assertion that when additional equal units of a variable resource are applied to fixed resources, a point is inevitably reached where total output increases at only a diminishing rate. It is impossible to vary all influences on production both proportionally and simultaneously, so diminishing marginal returns occur even in the long run.

law of diminishing marginal utility:

The law of diminishing marginal utility (satisfaction) asserts that after some point, the more you have of any good relative to other goods, the less you desire and are willing to pay for additional units of that good. The marginal utility from any good, service, or activity eventually declines as the individual obtains more of the good, service, or activity. The converse is also true.

law of diminishing returns:

The law of diminishing returns is the concept that beyond some point, the further any activity is extended, the more difficult (and costly) it is to extend that activity further. In mathematical terms, the law of diminishing returns rests on the notion that all activities are ultimately bounded by a convex hull.

law of equal marginal advantage:

The law of equal marginal advantage asserts that efficiency requires using similar units of resources in equally advantageous ways.

law of equal marginal utilities per dollar:

The law of equal marginal utilities per dollar asserts that maximizing consumer satisfaction requires the last few cents spent on any good to yield identical amounts of satisfaction or utility. This can be expressed mathematically as MU1 ∕ P1 = MU2 ∕ P2 = . . . = MUn ∕ Pn, where the subscripts 1 through n denote different goods.

law of large numbers:

The law of large numbers is based on the central limit theorem, and posits that large numbers of random outcomes from experiments will be normally distributed per a standard bell (Gaussian) curve.

law of one price:

The strong version of the law of one price (sometimes known as global monetarism) is a theory that assumes free and frictionless trade, and asserts that the relative prices of goods and resources will be identical in every market everywhere. A weak version of the law of one price asserts that goods in any country will be equal in price to the price in all other countries after adjustments for exchange rates, necessary transactions costs, and artificial barriers (e.g., tariffs or quotas) that hinder trade. Arbitrage eliminates price differentials. See also arbitrage, efficient markets, purchasing power parity, and rational expectations.

law of small numbers:

The “law of small numbers” is a facetious phrase intended to characterization the misperceptions that underpin the gambler’s fallacy. People tend to remember outcomes that seem unusual, and to perceive patterns in sequential outcomes of purely random events. The “law” of small numbers is an expectation that previous outcomes for random events have predictive power for the outcomes of future random events that are actually determined independently. For example, if six flips of a coin have resulted in “heads,” it is incorrect [irrational?] to expect that the “odds will even out” so that an additional 94 coin flips will be most likely to yield a cumulative total of 50 heads and 50 tails. The actual expectation for the cumulative outcome after the next 94 flips is E[heads] = 0.5[94] + 6, so the correct expectation is that the 100 total flips will yield 53 heads and 47 tails. See also gambler’s fallacy.

law of supply:

The law of supply asserts that, all else being equal, higher prices induce greater production and offers to sell, and that lower prices elicit a lesser quantity supplied.

law of unintended consequences.

See unintended consequences.

layoff:

A layoff is a reduction of employment at a firm that no longer expects to profit from the employment of a worker or group of workers. Contrast with the verb fire.

leading economic indicator:

A leading economic indicator is a variable that changes in a reasonably systematic way when the overall state of the economy changes, but a leading economic indicator hits its peaks and troughs before the overall economy experiences its peaks and troughs. See also lagging economic indicator and coincident economic indicator.

leakages:

See withdrawals.

learning by doing:

“Learning by doing” is the label applied by Nobel-prize winning economist Robert Solow to describe the growth in productivity that occurs when workers in less developed countries begin gaining experience through on-the-job training. Some economists use the synonymous phrase dynamic economies of scale to refer to this concept, which is also used to describe the productivity gains and decreases in average costs that occur as a firm gains experience in producing a specific product, or as it adapts to a new technology. See also absorptive capacity.

learning curve:

A learning curve refers to the difficulty (out-of-pocket costs and time absorbed) of becoming proficient with a concept or technology. Whether a firm or a country, the learning curve is approximated by the decline in average costs across time or the increasing productivity across time as cumulative output increases. The learning curve link has a figure that illustrates the relationships between production costs, the learning curve, and absorptive capacity—the speed with which a society or organization can adapt to new technology. See also insider-outsider problem and absorptive capacity.

least cost production:

Least cost production is a basic requirement for economic efficiency. Least cost production holds only if the equimarginal principle that marginal costs and benefits are equated is met, and is logically equivalent to maximization of the output from given amounts of resources or a given budget.

legacy costs:

Legacy costs are costly commitments made by decisionmakers in earlier times but due and payable now or in the future. For example, firms are often contractually obligated to provide health care and pay pensions to retired employees. When these obligations were incurred, postponing employment costs boosted firms’ reported profits – and compensation to executives who negotiated the contracts. However, such legacy costs often place current executives of long-established firms [e.g., American automakers] at severe disadvantages relative to the managers of newer firms [e.g., rapidly-growing foreign-based carmakers].

legacy motive:

The legacy motive is the incentive that some people have to generate income through work or investment and to save because they want to enrich their heirs or other assigns. Also known as the endowment motive.

legal barriers to entry:

Legal barriers to entry are barriers erected by government that maintain market power for some firms by legally prohibiting or limiting competition from other firms. Legal barriers include patents, copyrights, and licensing or bonding restrictions. See also artificial barriers to entry, natural barriers to entry.

legal incidence:

The legal incidence of a tax falls on the party who legally must pay the tax to government, but the economic incidence (the tax burden) may be shifted to other parties.

legal reserves:

The “legal reserves” of banks are the sum of the banks’ required reserves and its excess reserves.

legal tender:

The term “legal tender” applies to currency that is deemed by a government to be acceptable and legal for financial transactions, both public and private.

leisure:

Leisure is the term economists apply to all time not spent working to generate income. Thus, everyone’s time is divisible into leisure and employment, which may be either with a firm or as self-employed entrepreneurs.

lemons market:

The theory of the “lemons market” is the notion that adverse selection will cause the market for used cars to be dominated by bad used cars (lemons) because asymmetric information causes good used cars (“creampuffs”) and lemons to sell for the same prices. The lemons market model is increasingly applied to other markets, e.g., labor markets and financial markets. See also adverse selection.

lender of last resort:

Congress initially authorized the Federal Reserve System to act as a “lender of last resort,” lending reserves to sound banks in cases of possible “runs on the bank” during a financial crisis. The Fed acts as a lender of last resort through the “discount window,” and charges interest at the “discount rate.”

Leontieff paradox:

The Leontieff paradox is the 1954 finding (by Nobel-Prize winning economist Wassily Leontieff [1906-1999]) that the United States, by almost any measure the most capital abundant country in the world, apparently exported labor-intensive goods and imported capital-intensive goods. This result seemed to contradict the predictions of the Heckscher-Ohlin model of trade, but subsequent research has suggested that even more than physical capital, the United States is relatively endowed with human capital and exceptionally fertile soil. (The topsoil is 6-12 feet deep in much of the American Midwest, far deeper than any other comparably sized region in the world.) US exports tend to be relatively intensive in either land or capital, which seems to validate the Heckscher-Ohlin model and resolve the Leontieff Paradox. See also Heckscher-Ohlin model.

Lerner index of monopoly power:

The Lerner index of monopoly power (LMP) is an estimate of market power proposed by Abba Lerner based on the proportion by which the price of output exceeds marginal cost. Market power is then measured as: (P ‑ MC) ∕ P.

Lerner wage-price reaction functions:

See asymmetric wage-price reaction functions.

less developed countries:

Less developed countries are among the world’s poorest nations, and include most nations in Africa, South America, and parts of Asia (excluding Japan, Taiwan, Singapore, and South Korea). Less developed nations are sometimes referred to as “underdeveloped.” See also developed countries, developing countries, and trap of underdevelopment.

leverage:

Leverage is the ratio of debt to equity in the financing of an investment, where debt is a measure of borrowed funds and equity is measured by the investor’s unborrowed (unencumbered) funds. Leverage increase the risk of loss from an investment, but it also increases the investor’s gains if the investment proves profitable.  An investor (or firm) is said to be highly leveraged if a project is financed using a high ratio of debt to equity.

leverage ratio:

The term leverage ratio usually refers to the ratio of a firm’s debts relative to its total assets, but the term is also sometimes used to refer to the ratio of a firm’s debts to its equity.

leveraged buyout:

A leveraged buyout (LBO) is a transaction used to convert a public (widely-held) corporation into a private (closely-held) corporation. LBOs are frequently financed through debt such as bank loans and bonds. The resulting high debt/equity ratios of most of these new corporations usually cause their bonds to be rated below investment-grade, and they are termed high-yield bonds or junk bonds.

liability:

The debt or other responsibility of one agent (an individual, household, or firm) owed to another agent.

liberal:

From roughly 1750 until early in the 20th Century, “liberal” thinkers were those who opposed governmental (royal) solutions to economic problems, favoring market solutions instead for most economic problems. Many 19th century liberals (e.g., John Stuart Mill) were also very concerned about civil liberties. See also neoliberalism.

libertarian paternalism:

Libertarian paternalism is the practice of structuring choices so that individuals are more likely to make decisions in accord with their long-term personal interests. Choice architects are people who structure the environment in which people make decisions. Thus, libertarian paternalism is operating if the manager of a school cafeteria (a choice architect) arranges food items to increase the likelihood that children will make the healthier choices of fresh fruit and vegetables instead of eserts heavily laden with empty calories. Similarly, if the default for new employees is participation in a subsidized pension plan but new hires can opt out of such plans, then the firm is practicing libertarian paternalism relative to a strategy of the default being nonparticipation absent a positive application from the new employee. See also paternalism and asymmetric paternalism.

libertarianism:

Libertarianism is a political philosophy based on the notion that individual freedom is the most important social goal. Libertarians view government as inherently coercive, and urge reliance on the free market system to resolve nearly every human problem.

LIBOR:

The London Interbank Offered Rate (LIBOR) is the interest rate charged London Banks in the interbank market for unsecured loans from other London banks. LIBOR rates are the English equivalent of the American federal funds rate, and it is internationally used as a base for pricing many types of consumer and corporate loans, and debt securities in the international economy.

lien:

A lien is a legal claim against a piece of property that gives a lender the right to foreclose or seize the property if a loan on the property is not repaid as promised.

life cycle saving:

Life cycle saving is saving motivated by the attempts of individuals to smooth their consumption across their lives, so they save when they are working, and spend from their savings after they retire.

life-cycle hypothesis:

The life-cycle hypothesis is a theory developed by Nobel-Prize winner Franco Modigliani that people try to smooth the level of consumption over their lives, borrowing when they are young and their incomes are low, saving when they are established workers with higher incomes, and then spending their savings after they retire. This concept closely parallels the permanent income hypothesis developed by Milton Friedman.

limit pricing:

In a limit pricing model, firms that possess significant market (monopoly) power set a profitable price that is still low enough to discourage potential entrants.

limited liability:

The legal doctrine of limited liability holds that stockholders in a corporation cannot be held liable for the debts of a corporation or dames caused by the corporation’s operations.  The potential losses of owners of common stock are usually limited to the amounts that they paid for the stock, and they lose only to the extent that the stock loses value.

linear relationship:

A linear relationship is describable by an equation Y = mX + b, where m is the slope of a straight line and b is the intercept of the line in a Cartesian space.

linearly homogeneous functions:

A function is linearly homogeneous (homogeneous of degree one) if multiplication of all elements of the functions by a constant scalar α yields an increase in the value of the function by a.  Thus: a¦(x1, x2,..., xn) = ¦(ax1, ax2, .... , axn). The assumption that production functions are linearly homogeneous is common in much of economic analysis. See also Cobb-Douglas functions and CES functions.

line-item veto:

A line item veto allows the executive branch (e.g., state governors) to delete specific items in an appropriations bill before signing it. Numerous governors possess the power to veto in this fashion, but the president of the United States does not. Proposals intended to curb federal spending often include the adoption of a line item veto.

liquidity:

Liquidity is a measure of how close an asset is to cash. The transaction costs entailed with the purchase or sale of an asset are positively related to its illiquidity. One way to estimate liquidity is to consider how much you would lose if you bought and then immediately sold an asset. The greater the percentage loss in such an exchange, the less liquid is the asset.

liquidity constraint:

An individual or organization experiences a liquidity constraint when their assets would be adequate for necessary repayment of debt or to accommodate their desired spending plans if sufficient time were permitted to limit the transaction costs incurred in selling the assets, but a requirement that the assets be liquidated promptly would entail significant transaction costs and not yield funds sufficient to accommodate the desired level of spending or repayment.

liquidity effect:

The liquidity effect refers to the initial decreases (increases) in both the nominal interest rate and the real interest rate brought about by an increase (decrease) in the rate of growth of the nominal money supply. Also known as the Keynes effect, or more properly, Keynes effect II. See also Fisher effect.

liquidity preference:

Liquidity preference is a concept first elaborated extensively by John Maynard Keynes referring to the fact that, all else equal, people usually prefer liquid assets to less liquid assets, so that higher expected rates of return are required to induce average investors to hold less liquid assets. See also liquidity trap.

liquidity premium theory:

The liquidity premium theory asserts that interest rates on a long-term bond will exceed an average of the short-term interest rates expected to occur over the life of the long-term bond by the amount of a positive liquidity premium. This theory explains why interest rates on bonds with different maturities move together. See also yield curve and term structure of interest rates.

liquidity trap:

In a liquidity trap, the demand for money is extremely sensitive to the interest rate movements and may even become horizontal at very low interest rates. A perfect liquidity trap would require economic transactors to choose to hold all increases in the nominal money supply in idle cash balances. Even John Maynard Keyes agreed that no perfect liquidity trap has ever existed.

living wage:

A living wage is a wage that yields an income level sufficient for the vital needs of the worker and their dependents, based on factors that include prices for reasonably comfortable housing, clothes, food and transportation. As used vernacularly, “living wage” is a relative concept, not an absolute one.

LM curve:

The LM curve is a positively-sloped line connecting the combinations of income and the interest rate that reflect all possible equilibria in the money market.  At each point on the LM curve, for the specific level of income on the horizontal axis, the corresponding interest rate on the vertical axis is that which allows the demand for money, L, to equal the fixed supply of money, M.  The curve is positively-sloped because increases in income yield increases in the transactions demand for money, and an increase in the interest rate needed to clear the market for assets (Keynesian liquidity preference).  The LM curve shifts to the left when there is: (a) an increase in the demand for money (for reasons unrelated to income) or (b) a decrease in the supply of money. The LM curve shifts to the right in response to (a) decreases in the demand for money (for reasons unrelated to income), or (b) increases in the supply of money.

loan shark:

A loan shark is an individual or firm that charges interest rates that exceed legal ceilings established by usury laws. The customers of loan sharks are people who want to borrow but who are denied loans by legitimate lenders because of credit rationing. Loan sharks are infamous for sometimes using violence to collect on debts.

lobbying:

Lobbying is a process by which individuals or special interest groups try to encourage elected representatives to support policies the lobbyists favor.  Representatives tend to respond to lobbying when there is the prospect of votes or campaign donations to enhance their prospects for reelection, or in cases of successful outright bribery.

location rents:

Location rents are the surpluses to landowners derived when transaction costs are reduced by locating a firm or household in a specific location as opposed to a less convenient location.  The value of a particular parcel of land tends to be negatively related to its distance from hubs of business activity.

lockout:

A lockout occurs when collective bargaining between an employer and a union breaks down and the employer shuts down the plant, so that workers cannot work until contract disputes are resolved.

logrolling:

The trading of votes by legislators is termed logrolling. See Political Allocation

long position:

Financial investors are in a long position when they contract to buy an asset at a future point in time at a prespecified price. Contrast with short position or short sell.

long run:

The long run (LR) is an analytical period of sufficient duration to make all feasible resource adjustments to any event, although, for convenience, technology is usually assumed constant for purposes of long-run analyses. Fixed costs are zero in the long run.

long wave theory of business cycles:

A long wave theory of business cycles theory was developed in the 1920s by the Russian economist Nikolai Kondratieff, who hypothesized that long (50-60 year) waves in economic activity seem inevitable.

long-run average cost curve:

A long-run average cost curve (LRAC) shows the minimum average costs of producing each level of output after adjusting all resource inputs, including the size of the plant.

loophole:

A loophole is a technicality in the wording of a law that allows an economic agent to gain by violating the intent of the law without violating the letter of the law. Tax loopholes are common examples, whereby taxpayers reduce their tax bills by avoiding or camouflaging the activity intended to be taxed, or through creative accounting. See also loophole mining and creative response. Loopholes may be intentional, as a consequence of special interest lobbying of legislators or regulators, or unintentional, as when a law is flawed by ambiguous language.

loophole mining:

Loophole mining is the process of attempting to identify loopholes to enable economic agents to legally avoid or evade (illegal) the intent of a law or regulation. When tax laws are changed, for example, armies of accountants and tax lawyers immediately begin loophole mining to ascertain how various economic agents can profit by skirting the intent of the law.

Lorenz curve:

A Lorenz curve shows the degree of inequality that exists in distributions of income or wealth in a particular society. Open the Lorenz curve link for a graph and more discussion, and see also Gini coefficient.

loss:

A loss is a negative profit, and occurs when a firm’s revenues do not cover its costs. See also economic loss.

loss aversion:

Loss aversion occurs when people prefer a riskier choice with a lower expected present value to a less risky choice involving a greater probability of loss. Although loss aversion was described earlier by NobelPrize winner Maurice Allais, cognitive psychologists have follwoed the lead of Daniel Kehneman and Amos Tversky in focusing on a reflection effect. They observe loss aversion in many instances on the parts of most people, but these same people are risk averse when contemplating potential gains. For example, many individuals confronted with a choice (gamble) between losing $3,000 with certainty versus losing $100,000 with probability of 4 percent will choose the risky alternative, despite its relatively higher expected losses. ((0.04×$100,000) = $4,000 > $3,000.) Loss aversion is logically equivalent to risk loving. See also reflection effect, risk averse, risk neutral, risk loving, and prospect theory.

lost income costs of unemployment:

The lost income costs of unemployment are the values of the output the unemployed could have produced. In a severe depression or recession these costs can be large percentages of national income.

lottery:

Lottery is a form of random selection, and was used to determine who would be drafted during the War on Vietnam. More recently, lotteries run by states have been a form of gambling that generates significant revenues for state coffers. Lottery tickets are sold, and the winners are selected by a random process. State lotteries are sometimes described as “taxes on the mathematically impaired,” because the odds against winning the sometimes astronomical “jackpots” are even more phenomenal, so that the present value of a lottery ticket is roughly 12 cents for each dollar spent. State lotteries are also condemned by critics as a "tax on the poor" because the poor tend to spend a significantly higher proportion of their incomes on lottery tickets than do people in more comfortable circumstances.

low-benefit high-cost care:

Low-benefit high-cost health care is a term increasingly applied to the continuing spread of public and private health insurance.  The term critiques the high-costs one entails when using insurance even though the benefits are often relatively trivial, on average.

luddites:

Luddites believe that workers are entitled to job security when using traditional production methods, and thus, oppose advances in technology. Luddites also oppose the social and economic disruptions caused by expansion of specialized production and trade. The “Luddite” movement originated with machine-breaking early 19th century English workers who were outraged that textile looms could eliminate the jobs of workers who had hand-loomed woolens for decades. An interesting tangent: The word “sabotage” derives from the word for the Dutch wooden shoe, sabot. A legend, perhaps apocryphal, is that some Dutch workers slowed the pace of industrialization and protested job losses caused by early automation by dropping shoes into assembly line machinery to break the equipment. See also anti-globalization.

lump of labor fallacy:

The “lump of labor” fallacy is the belief that only a set amount of work is available to workers, and the work must be distributed to create more jobs or some work must be shared. [See also work sharing.] This fallacy often underpins advocacy of trade barriers [if we don’t import cheap foreign goods, there will be more work for Americans] or opposition to the introduction of labor-saving technologies. See also Luddites.

lump sum:

A lump sum is single payment of fixed value.

lump sum tax:

A lump sum tax is a tax of fixed amount imposed on an entity with no tax base other than the entity’s existence. Lump sum taxes are sometimes described as the “gold standard” (best example) of neutral taxes, with no distortive substitution effects. However, as a wag once pointed out, even a lump sum tax does reduce the incentive for existence, and may generate a substitution effect toward suicide.

lumpy decision:

A lumpy decision entails trade-offs or compromises because realizing a benefit from a choice necessitates accepting undesirable peripheral costs. Lumpy decisions almost always depend on indivisibilities; as when a good or policy cannot be fine-tuned down to tiny increments. For example, buying machinery can be a lumpy investment decision. A firm cannot buy 1.5 machines, so if it uses either of two extra machines only part time, it incurs higher costs than if 1.5 machines were feasible. Ordering food a la carte versus the all-you-can-eat buffet is a lumpy consumer decision. And voting is usually a lumpy decision because political candidates rarely mirror voter preferences perfectly. See also tie-in sales.

luxury good:

Demands for luxury goods are exceptionally sensitive to changes in real income. The term luxury good is usually applied to a good with income elasticity significantly greater than one, although this definition is relatively informal.