Preface with the study of epidemiology. Animal Health Economics or Livestock Health Economics is a discipline that aims to provide a framework of concepts, procedures and data to support the decision making process in optimizing animal health management .The term decision making implies that there are certain alternatives to choose between, which makes it a key element of economics. Economics is a social science that studies human behavior as a relationship between ends and scarce means which have alternative uses. As described in the basic model underlying economic analysis, the needs of people are satisfied by consuming products in the form of goods or services. The physical factors and services, on which the production of products is based, are called resources. The aspect of livestock production that focuses on animal disease is called animal health management. In order to quantify the economic impact of disease, the appropriate costs and values associated with the resources and products, respectively, should be quantified. Depending on whether simple market prices or economic values of goods are used, the result is a financial or an economic assessment, respectively. The World Health Organization defined health in the year 1948 as “A state of complete physical, social and mental well-being, and not merely the absence of disease or infirmity”. Focus on animal welfare other than just the absence of diseases has increased in the recent years. Apart from any negative effects of animal welfare on productivity and product quality and apart from a surplus price a farmer can get for improved welfare on his farm (milk from cows with access to pasture), animal welfare has an economic meaning of its own. It is the feeling of unease in society about the way animals are kept in modern livestock that has an economic cost. This is another example of an economic rather than a financial assessment and depends on the utility function of the human in question. Even though diagnosing a disease uniformly and consistently is not easy, simplifying the definition of health as the absence of disease does facilitate the work of a veterinary epidemiologist. Their scientific area is concerned with prevention and control of disease in animal populations. Besides, it investigates and assesses other health-related events, notably productivity. Since the subject Animal Health Economics or Livestock Health Economics itself is evolving and trying to establish it, the concepts and the words used in it are less understood. The concepts and the words of this subject have been derived from various disciplines like veterinary epidimiology, economics and statistics. An attempt has been made to compile the list of concepts and the words from different published sources which will be useful for the academicians, researchers and students having interest in teaching and research in the field of livestock health economics/animal health economics/veterinary economics.

Absolute advantage : This is the simplest yardstick of economic performance. If one person, firm or country can produce more of something with the same amount of effort and resources, they have an absolute advantage over other producers. Being the best at something does not mean that doing that thing is the best way to use your scarce economic resources. The question of what to specialise in—and how to maximize the benefits from international trade—is best decided according to comparative advantage. Both absolute and comparative advantage may change significantly over time. Access to Health Care : 1) The degree to which individuals are inhibited or facilitated in their ability to gain entry to and to receive care and services from the health care system. Factors influencing this ability include geographic, architectural, transportation, and financial considerations, among others. 2) Entry to the health care system is dependent on the wants, resources, and needs that individuals bring to the care-seeking process. Ability to obtain wanted or needed services may be influenced by many factors, including travel distance, waiting time, available financial resources, and availability of a regular source of care. Acquisition cost : The purchase cost of a drug to an agency, person or institution. Adaptive expectations : A theory of how people form their views about the future that assumes they do so using past trends and the errors in their own earlier predictions. Contrast with rational expectations.

Backwardation : When a commodity is valued more highly in a spot market (that is, when it is for delivery today) than in a futures market (for delivery at some point in the future). Normally, interest costs mean that futures prices are higher than spot prices, unless the markets expect the price of the commodity to fall over time, perhaps because there is a temporary bottleneck in supply. Balance of payments : The total of all the money coming into a country from abroad less all of the money going out of the country during the same period. This is usually broken down into the current account and the capital account. The current account includes : *visible trade (known as merchandise trade in the United States), which is the value of exports and imports of physical goods; *invisible trade, which is receipts and payments for services, such as banking or advertising, and other intangible goods, such as copyrights, as well as cross-border dividend and interest payments; *private transfers, such as money sent home by expatriate workers; official transfers, such as international aid. The capital account includes : *long-term capital flows, such as money invested in foreign firms, and profits made by selling those investments and bringing the money home; *short-term capital flows, such as money invested in foreign currencies by international speculators, and funds moved around the world for business purposes by multinational companies. These short-term flows can lead to sharp movements in exchange rates, which bear little relation to what currencies should be worth judging by fundamental measures of value such as purchasing power parity. As bills must be paid, ultimately a country’s accounts must balance (although because real life is never that neat a balancing item is usually inserted to cover up the inconsistencies). Balanced budget : When total public-sector spending equals total government income during the same period from taxes and charges for public services. Politicians in some countries, such as the United States, have argued that government should be required to run a balanced budget in order to have sound public finances. However, there is no economic reason why public borrowing need necessarily be bad. For instance, if the debt is used to invest in things that will increase the growth rate of the economy—infrastructure, say, or education—it may be justified. It may also make more economic sense to try to balance the budget on average over an entire economic cycle, with public-sector deficits boosting the economy during recession and surpluses stopping it overheating during booms, than to balance it every year.

Capacity : The amount a company or an economy can produce using its current equipment, workers, capital and other resources at full tilt. Judging how close an economy is to operating at full capacity is an important ingredient of monetary policy, for if there is not enough spare capacity to absorb an increase in demand, price are likely to rise instead. Measuring an economy’s output gap – how far current output is above or below what it would be at full capacity – is difficult, if not impossible, which is why even the best-intentioned central bank can struggle to keep down inflation. When there is too much spare capacity, however, the result can be deflation, as firms and employees cut their prices and wage demands to compete for whatever demand there may be. Capital adequacy ratio : The ratio of a banks’s capital to its total assets, required by regulators to be above a minimum (“adequate”) level so that there is little risk of the bank going bust. How high this minimum level is may vary according to how risky a bank’s activities are. Capital Asset Pricing Model : A method of valuing assets and calculating the cost of capital (for an alternative, see arbitrage pricing theory). The capital asset pricing model (CAPM) has come to dominate modern finance. The rationale of the CAPM can be simplified as follows. Investors can eliminate some sorts of risk, known as residual risk or alpha, by holding a diversified portfolio of assets (see modern portfolio theory). These alpha risks are specific to an individual asset, for example, the risk that a company’s managers will turn out to be no good. Some risks, such as that of a global recession, cannot be eliminated through diversification. So even a basket of all of the shares in a stock market will still be risky. People must be rewarded for investing in such a risky basket by earning returns on average above those that they can get on safer assets, such as treasury bills . Assuming investors diversify away alpha risks, how an investor values any particular asset should depend crucially on how much the asset’s price is affected by the risk of the market as a whole. The market’s risk contribution is captured by a measure of relative volatility, beta, which indicates how much an asset’s price is expected to change when the overall market changes. Safe investments have a beta close to zero : economists call these assets risk free. Riskier investments, such as a share, should earn a premium over the risk-free rate. How much is calculated by the average premium for all assets of that type, multiplied by the particular asset’s beta. But does the CAPM work ? It all comes down to beta, which some economists have found of dubious use. They think the CAPM may be an elegant theory that is no good in practice. Yet it is probably the best and certainly the most widely used method for calculating the cost of capital.

Deadweight cost/loss : The extent to which the value and impact of a tax, tax relief or subsidy is reduced because of its side-effects. For instance, increasing the amount of tax levied on workers’ pay will lead some workers to stop working or work less, so reducing the amount of extra tax to be collected. However, creating a tax relief or subsidy to encourage people to buy life insurance would have a deadweight cost because people who would have bought insurance anyway would benefit. Death-to-case ratio : The number of deaths attributed to a particular disease during a specified time period divided by the number of new cases of that disease identified during the same time period. Debt forgiveness : Cancelling or rescheduling a borrower’s debts to lessen the pain of the debt burden. Debt forgiveness is increasingly viewed as the best way to relieve the financial problems facing poorer countries. Some of these countries have to pay so much in interest each year to foreign lenders that they have little money left to spend on the long-term solutions to their poverty, such as educating their workers and building a modern infrastructure. In 1998 the world Bank calculated that around 40 of the world’s poorest countries had an “unsustainably high” debt burden : the present value of their total debts was more than 220% of their exports. Debt forgiveness has potential drawbacks. For instance, there is a risk of moral hazard. If countries that borrow too much are let off their financial obligations, poor countries may feel they have nothing to lose by borrowing as much as they can. This is why policymakers often argue that debt forgiveness should come with a conditionality clause, for instance, a requirement that countries have a track record of implementing economic reforms designed to prevent a repeat of the errors that first created the need for debt forgiveness. This is the approach taken by the World Bank’s HIPC (highly indebted poor country) initiative, launched in 1996 and expanded in 1999. However, by 2003, only eight of the 38 poor countries eligible under the programme had made enough progress in reform to have some debt forgiven.

Econometrics : Mathematics and sophisticated computing applied to economics. Econometricians crunch data in search of economic relationships that have statistical significance. Sometimes this is done to test a theory; at other times the computers churn the numbers until they come up with an interesting result. Some economists are fierce critics of theory-free econometrics. Economic Appraisal : See Economic evaluation. Economic Burden of Disease : See Cost of Illness. Economic Competition : The effort of two or more parties to secure the business of a third party by offering, usually under fair or equitable rules of business practice, the most favorable terms. Economic evaluation (Economic appraisal) : The comparison of alternative courses of action in terms of their costs and consequences, with a view to making a choice. Economic Evaluation : The systematic appraisal of costs and benefits of projects, normally undertaken to determine the relative economic efficiency of programs. See also Cost-benefit analysis, Cost-effectiveness analysis, Cost-minimization analysis, Cost-utility analysis. Economic indicator : A statistic used for judging the health of an economy, such as GDP per head, the rate of unemployment or the rate of inflation. Such statistics are often subject to huge revisions in the months and years after they are first published, thus causing difficulties and embarrassment for the economic policymakers who rely on them.

Factor cost : A measure of output reflecting the costs of the factors of production used, rather than market prices, which may differ because of indirect tax and subsidy. Factors of production : The ingredients of economic activity : land, capital, labour and enterprise. Factory prices : The prices charged by producers to wholesalers and retailers. Because these prices are eventually passed on to the end customer, changes in factory prices, also known as producer prices, can be a leading indicator of consumer price inflation. Fair trade : Many politicians and NGOs argue that free trade is not enough; it should also be fair. On the face of it, fairness is self-evidently a good thing. However, fairness, in trade as in beauty, lies in the eye of the beholder. Frederic Bastiat, a 19th-century French satirist, once observed that the sun offered unfair competition to candle makers. If windows could be boarded up during the day, he argued, more jobs could be created making candles. American trade unions complain that Mexicans’ lower wages, say, give them an unfair advantage. Mexicans say they cannot compete fairly against more productive American counterparts. Both sides are wrong. Mexicans are paid less than Americans largely because they are, in general, less productive. There is nothing unfair about that; indeed, it helps to make trade mutually beneficial. The mutual benefits of trade also disprove the fair traders’ other complaint, that free trade harms poor countries. (See comparative advantage). FDI : See Foreign direct investment. Fee : A charge for a service rendered.

Game theory : How to win at Twister? No, but maybe at monopoly. Game theory is a technique for analysing how people, firms and governments should behave in strategic situations (in which they must interact with each other), and in deciding what to do must take into account what others are likely to do and how others might respond to what they do. For instance, competition between two firms can be analysed as a game in which firms play to achieve a long-term competitives advantage (perhaps even a monopoly). The theory helps each firm to develop its optimal strategy for, say, pricing its products and deciding how much to produce; it can help the firm to anticipate in advance what its competitor will do and shows how best to respond if the competitor does something unexpected. It is particularly useful for understanding behaviour in monopolistic competition. In game theory, which can be used to describe anything from wage negotiations to arms races, a dominant strategy is one that will deliver the best results for the player, regardless of what anybody else does. One finding of game theory is that there may be a large first-mover advantage for companies that beat their rivals into a new market or come up with an innovation. One special case identified by the theory is the zero-sum game, where players see that the total winnings are fixed; for some to do well, others must lose. Far better is the positive-sum game, in which competitive interaction has the potential to make all the players richer. Another problem analysed by game theorists is the prisoners’ dilemma. (See also nashequilibrium). GATT : See general agreement on tariffs and trade and world trade organisation. GDP : Gross domestic product, a measure of economic activity in a country. It is calculated by adding the total value of a country’s annual output of goods and services. GDP = private consumption + investment + public spending + the change in inventories + (exports-imports). It is usually valued at market prices; by subtracting indirect tax and adding any government subsidy, however, GDP can be calculated at factor cost. This measure more accurately reveals the income paid to factors of production. Adding income earned by domestic residents from their investments abroad, and subtracting income paid from the country to investors abroad, gives the country’s gross national product (GNP).

Hard currency : Money you can trust. A hard currency is expected to retain its value, or even benefit from appreciation, against softer currencies. This makes it a popular choice for people involved in international transactions. The dollar, d-mark, sterling and the Swiss franc each became a hard currency, if only some of the time, during the 20th century. Hawala : An ancient system of moving money based on trust. It predates western bank practices. Although it is now more associated with the Middle East, a version of hawala existed in China in the second half of the Tang dynasty (618-907), known as fei qian, or flying money. In hawala, no money moves physically between locations; nowadays it is transferred by means of a telephone call or fax between dealers in different countries. No legal contracts are involved, and recipients are given only a code number or simple token, such as a low-value banknote torn in half, to prove that money is due. Over time, transactions in opposite directions cancel each other out, so physical movement is minimised. Trust is the only capital that the dealers have. With it, the users of hawala have a worldwide money-transmission service that is cheap, fast and free of bureaucracy. From a government’s point of view, however, informal money networks are threatening, since they lie outside official channels that are regulated and taxed. They fear they are used by criminals, including terrorists. Although this is probably true, by far the main users of hawala networks are overseas workers, who do not trust official money transfer methods or cannot afford them, remitting earnings to their families.

IMF : Short for International Monetary Fund, referee and, when the need arises, rescuer of the world’s financial system. The IMF was set up in 1944 at bretton woods, along with the world bank, to supervise the newly established fixed exchange rate system. After this fell apart in 1971–73, the IMF became more involved with its member countries’ economic policies, doling out advice on fiscal policy and monetary policy as well as microeconomic changes such as privatisation, of which it became a forceful advocate. In the 1980s, it played a leading part in sorting out the problems of developing countries’ mounting debt. More recently, it has several times co-ordinated and helped to finance assistance to countries with a currency crisis. Immunity, active : Resistance developed in response to stimulus by an antigen (infecting agent or vaccine) and usually characterized by the presence of antibody produced by the host. Immunity, herd : The resistance of a group to invasion and spread of an infectious agent, based on the resistance to infection of a high proportion of individual members of the group. The resistance is a product of the number susceptible and the probability that those who are susceptible will come into contact with an infected person. Immunity, passive : Immunity conferred by an antibody produced in another host and acquired naturally by an infant from its mother or artificially by administration of an antibody-containing preparation (antiserum or immune globulin).

Joint supply : Some products or production processes have more than one use. For instance, cows can both provide milk and be eaten.

Keynesian : A branch of economics, based, often loosely, on the ideas of keynes, characterized by a belief in active government and suspicion of market outcomes. 

Labour economics : The aspects of economics concerned with the supply and demand for labor. This includes factors affecting the participation rate, wage bargaining and organized labor, training, hours and conditions of work, practices concerning hiring, redundancy, labor turnover, migration and the age of retirement. Labour intensive : A production process that involves comparatively large amounts of labour; the opposite of capital intensive. Labour market flexibility : A flexible labour market is one in which it is easy and inexpensive for firms to vary the amount of labour they use, including by changing the hours worked by each employee and by changing the number of employees. This often means minimal regulation of the terms of employment (no minimum wage, say) and weak (or no) trade unions. Such flexibility is characterised by its opponents as giving firms all the power, allowing them to fire employees at a moment’s notice and leaving workers feeling insecure. Labour theory of value : The notion that the value of any good or service depends on how much labour it uses up. First suggested by adam smith, it took a central place in the philosophy of karl marx. Some neo-classical economists disagreed with this theory, arguing that the price of something was independent of how much labour went into producing it and was instead determined solely by supply and demand.

Macroeconomic policy : Top-down policy by government and central banks, usually intended to maximise growth while keeping down inflation and unempoyment. The main instruments of macroeconomic policy are changes in the rate of interest and money supply, known as monetary policy, and changes in taxation and public spending, known as fiscal policy. The fact that unemployment and inflation often rise sharply, and that growth often slows or gdp falls, may be evidence of poorly executed macroeconomic policy. However, business cycles may simply be an unavoidable fact of economic life that macroeconomic policy, however well conducted, can never be sure of conquering. Macroeconomics : The big picture analysing economy-wide phenomena such as growth, inflation and unemployment. Contrast with microeconomics, the study of the behaviour of individual markets, workers, households and firms. Although economists generally separate themselves into distinct macro and micro camps, macroeconomic phenomena are the product of all the microeconomic activity in an economy. The precise relationship between macro and micro is not particularly well understood, which has often made it difficult for a government to deliver well-run macroeconomic policy. Managed Care : Managed care is a livestock health care plan that integrates the financing and delivery of livestock health care services by using arrangements with selected health care providers to provide services for covered individuals. Plans are generally financed using capitation fees. There are significant financial incentives for members of the plan to use the health care providers associated with the plan. The plan includes formal programs for quality assurance and utilization review.

NAIRU : The non-accelerating-inflation rate of unemployment (see natural rate rate of natureal rate of unemployment). Nash equilibrium : An important concept in game theory, a Nash equilibrium occurs when each player is pursuing their best possible strategy in the full knowledge of the strategies of all other players. Once a Nash equilibrium is reached, nobody has any incentive to change their strategy. It is named after John Nash, a mathematician and Nobel prize-winning economist. Nation building : Creating a country that works out of one that does not - because the old order has collapsed (as in the former Soviet Union), or been destroyed by war (Iraq), or never really functioned in the first place (Afghanistan). To transform a failed country can involve establishing order through the rule of law and creating legitimate government and other effective social institutions, as well as a credible currency and a functioning market economy. Nation building is rarely easy, and often fiendishly difficult, especially where there are deep ethnic, religious or political divisions in the population or the country has no history of ever functioning effectively. Outside expertise, such as from the world bank, and money (as in, most famouly, the marshall plan) can help, but they are no guarantee of success.

Observational study : Epidemiological study in situations where nature is allowed to take its course. Changes or differences in one characteristic are studied in relation to changes or differences in others, without the intervention of the investigator. Odds ratio : A measure of association which quantifies the relationship between an exposure and health outcome from a comparative study; also known as the cross-product ratio. OECD : The Organisation for Economic Co-operation and Development, a Paris-based club for industrialised countries and the best of the rest. It was formed in 1961, building on the Organisation for European Economic Co-operation (OEEC), which had been established under the marshall plan. By 2003, its membership had risen to 30countries, from an original 20. Together, oecd countries produce two-thirds of the world’s goods and services. The oecd provides a policy talking shop for governments. It produces forests-worth of documents discussing public policy ideas, as well as detailed empirical analysis. It also publishes reports on the economic performance of individual countries, which usually contain lots of valuable information even if they are rarely very critical of the policies implemented by a member government.

Pandemic : An epidemic occurring over a very wide area (several countries or continents) and usually affecting a large proportion of the population. Partial Evaluation : Partial evaluations constitute a number of economic study types which consider costs and/or consequences, but which either do not involve a comparison between alternative interventions or do not relate costs to benefits. Participation bias : People who participate in a study, especially volunteers, may be systematically different from those who do not, in a way that can affect the response to a treatment. For example, if volunteers are chosen to test the effects of a vaccine, one might find a lower incidence of disease in this population simply because they are more health conscious than those who would not volunteer for such a study. Path dependence : History matters. Where you have been in the past determines where you are now and where you can go in future. Indeed, even small, apparently trivial, differences in the path you have taken can have huge consequences for where you are and can go. In economics, path dependence refers to the way in which apparently insignificant events and choices can have huge consequences for the development of a market or an economy.

Quality Adjusted Life Years (QALYs) : Calculated by adjusting the estimated number of life-years an individual is expected to gain from an intervention for the expected quality of life in those years. The quality of life score will range between 0 for death, to 1 for perfect health, with negative scores being allowed for states considered worse than death

Safe harbour : Protection from the rough seas of regulation. Laws and regulations often include a safe harbour clause that sets out the circumstances in which otherwise regulated firms or individuals can do something without regulatory oversight or interference. Sample : A selected subset of a population. A sample may be random or non-random and it may be representative or non-representative. Satisficing : Settling for what is good enough, rather than the best that is possible. This may occur in any situation in which decision makers are trying to pursue more than one goal at a time. Classical economics and neo-classical economics assume that individuals, firms and governments try to achieve the optimum, best possible outcome from their decisions. Satisficing assumes they decide for each goal a level of achievement that would be good enough and try to find a way to achieve all of these sub-optimal goals at once. This approach to decision making is commonplace in behavioural economics. It can be regarded as a realist’s theory of how decisions are taken. Savings : Any income that is not spent. Ultimately, savings are the source of investment in an economy, although domestic savings may be supplemented by capital from foreign savers or themselves be invested abroad. In an economic sense, savings include purchases of shares or other financial securities. However, many official measures of a country’s savings ratio—total savings expressed as a percentage of total income—leave out such financial transactions. At times when the demand for financial securities is unusually high, this can give a misleading impression of how much saving is taking place. How much individuals save varies significantly among different age groups (see life-cycle hypothesis) and nationalities. Everywhere, people of all ages save more as their income rises. The supply of savings rises when interest rates rise; a rise in interest rates causes demand for funds to invest to fall; a rise in demand for investment funds may cause interest rates, and thus the cost of capital, to rise. The level of savings is also influenced by changes in wealth (see wealth effect) and by taxation policies.

Table shell : A table that is complete except for the data. Table : A set of data arranged in rows and columns. Tangible assets : Assets you can touch : buildings, machinery, gold, works of art, and so on. Contrast with intangible assets. Tariff : Often used to describe a tax on goods produced abroad imposed by the government of the country to which they are exported. Many countries have reduced such tariffs as part of the process of freeing up world trade. Tax arbitrage : Creating financial instruments or transactions that allow the parties involved to exploit loopholes in or differences between their tax exposures, so that all involved pay less tax. Tax avoidance : Doing everything possible within the law to reduce your tax bill. Learned Hand, an American judge, once said : “There is nothing sinister in so arranging one’s affairs as to keep taxes as low as possible … nobody owes any public duty to pay more than the law demands.” Contrast with taxevasion. Tax base : The thing or amount to which a tax rate applies. To collect income tax, for example, you need a meaningful definition of income. Definitions of the tax base can vary enormously, over time and among countries, especially when tax breaks are taken into account. As a result, a country with a comparatively high tax rate may not have a high tax burden if it has a more narrowly defined tax base than other countries. In recent years, the political unpopularity of high tax rates has lead many governments to lower rates and at the same time broaden the tax base, often leaving the tax burden unchanged.

Uncertainty : See information. Underground economy : See black economy. Underinsured : Refers to livestock which have some type of livestock health insurance, such as catastrophic care, but not enough insurance to cover all their health care costs. Unemployment trap : When unemployed people who receive benefits, either from the goverment or from private charity, are deterred from taking a new job because the reduction or removal of benefit if they do will make them worse off. Also known as the poverty trap, it can be addressed, to an extent, by continuing to pay benefit for a while to unemployed people returning to work. (See welfare to work).

Validity : The degree to which a measurement actually measures or detects what it is supposed to measure. Value added : This usually refers to firms, where it is defined as the value of the firm’s output minus the value of all its inputs purchased from other firms. It is therefore a measure of the profit earned by a particular firm plus the wages it has paid. As a rule, the more value a firm can add to a product, the more successful it will be. In many countries, the main form of indirect indirect taxation is value-added tax, which is levied on the value created at each stage of production. However, it is paid, ultimately, by whoever consumes the finished product. Another definition of value added refers to the change in the overall economic value of a company. This takes into account changes in the combined value of its shares, assets, debt and other liabilities. Part of the pay of company bosses is often linked to how much economic value is added to the company under their management. Value at risk : Value at risk models, widely used for risk management by banks and other financial institutions, use complex computer algorithms to calculate the maximum that the institution could lose in a single day’s trading. These models seem to work well in normal conditions but not, alas, during financial crises, which is arguably when it is most necessary to know how much value is at risk.

Wage drift : The difference between basic pay and total earnings. Wage drift consists of things such as overtime payments, bonuses, profit share and performance-related pay. It usually increases during periods of strong growth and declines during an economic downturn. Wages : The price of labour. In theory, wages ought to change so that the sopply and demand in the labour market are always in equilibrium. In practice, wages are often sticky, especially in a downward direction when demand for labour falls, wages do not fall. In this situation, the fall in demand results in higher involuntary unemployment. Trade unions may use collective bargaining to keep wages above the market-clearing rate. Furthermore, many governments impose a minimum wage that employers must pay. Wealth effect : As people get wealthier, they consume more. This wealth effect has important consequences for monetary policy. When there is an interest rate increase, future income from assets such as equities must be discounted at a higher rate than before. As a result their owners feel poorer and spend less. A cut in interest rates has the opposite effect. Economists disagree on the wealth elasticity of consumption how much consumer spending would rise if wealth increased by, say, 1%. Different consumers may have different wealth elasticity. If most of the increase in wealth goes to poorer people this may have a different wealth effect than if most of it went to people who are already wealthy. The source of the wealth increase may also matter. If share prices rise or interest rates fall, consumers may be slow to spend out of their increased wealth if they think the increase may be temporary. However, if they think a sharp rise in share prices is permanent and the stockmarket then tumbles, the result may be that consumption falls by enough to cause a recession. The wealth effect of rising house prices is particularly uncertain.

X-efficiency : Producing output at the minimum possible cost. This is not enough to ensure the best sort of economic efficiency, which maximises society’s total consumer plus producer surplus, because the quantity of output produced may not be ideal. For instance, a monopoly can be an X-efficient producer, but in order to maximise its profit it may produce a different quantity of output than there would be in a surplus-maximising market with perfect competition.

Years of potential life lost : A measure of the impact of premature mortality on a population, calculated as the sum of the differences between some predetermined minimum or desired life span and the age of death for individuals who died earlier than that predetermined age.

Zero-sum game : When the gains made by winners in an economic transaction equal the losses suffered by the losers.