No Free Lunch: Economics for a Fallen World: Third Edition, Revised

Appendix A Definition Index 480 Internalize the externality: when parties to any exchange include the costs and benefits that their actions impose (or provide) to others in their supply and demand schedules. (Chapter 13—Flower Power!) Inter-temporal coordination: refers to the coordination of consumption across time; this coordination is enabled by the interest rate. (Chapter 12—Loanable Funds Framework) Invisible hand: the principle that individuals acting in their own self-interest will tend to act in a way that is socially beneficial, even though it was not part of their original intent. (Chapter 2—Emergent Order) L Labor Force Participation Rate: measures the percentage of the total adult population that is in the civilian labor force (either employed or unemployed). (Chapter 18—Unemployment) “Laissez-faire” capitalism: an economic system where individuals are free to produce and trade consistent with their private property rights, with no interference from others or the government. The government’s role in this economic system is to secure property rights by restricting violence, enforcing contracts, and punishing fraud. (Chapter 5—Introduction) Law of demand: as the price of any good falls, the quantity demanded rises; as price rises, the quantity demanded falls— ceteris paribus . (Chapter 3—A Deeper Dive into Concepts for Demand) Law of diminishing marginal utility: As more of a good is consumed, the additional (incremental, or marginal) utility is positive, but lower than the utility provided by the previous unit consumed. (Chapter 2—Utility) Law of diminishing returns: the increase in production from increasing one factor of production (while holding the other factors constant— ceteris paribus ) will eventually decrease. (Chapter 7—Structure of Production: Stages of Capital/Production Function) Law of markets: The purchasing power (money) necessary to enable someone to demand goods in a market comes from their income earned while producing other goods. (Chapter 4—Introduction) Law of one price: In the absence of transactions costs, tradable goods should sell for the same price in different locations. (Chapter 15—Purchasing Power Parity) Law of supply: As the price of a good or service rises, the quantity supplied rises. (Chapter 4—Supply and Costs/Supply Curves)