Welcome to the SwiftEconomics.com Glossary! Each word will come to life using witty jokes, satire, and colorful examples. The glossary is meant to amuse and educate; not to be traditional or academic. The SwiftEconomics.com team wants to hammer home a few vital ideas throughout the vocabulary lesson. For example, keep an eye on asymmetric information’s effect on health insurance. Please share the SwiftEconomics.com Glossary with colleagues, friends, and family!

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Setting the bar a little lower. When juggling many issues at once, people sometimes stop trying to get the most out of scarce resources. Instead they decide to choose a lower level of success for a myriad of issues and call it good; perhaps because attention and focus are the truly scarce resources for humans.

Another contribution from behavioural economics, some believe this is a more realistic model of economic choices.


Feed the pig, right accountants? Cash inflows not spent. Theoretically funds used for investment come from savings but governments borrow money for investment all the time. If government “investments” are not real investments in production and infrastructure problems can arise.

Say’s Law

Which comes first: supply or demand? French economist Jean-Baptiste Say said supply. Repeat that ten times fast. He was alive in the 18th and 19th centuries and felt as long as there was supply, demand would follow.

Say’s theory works a little better in an economy more like a spattering of guilds then the consumer mall we have today. Consider the animated movie Delgo. You’ve likely never heard of this film because no one went to see it. Delgo was released December 12, 2008 by Fathom Studios. Animated family films like Shrek and Finding Nemo have a long history of raking it in at the box office. If there was ever a situation where supply creates demand, this was it. Delgo made some dubious history managing a meager $511,920 in its opening weekend in wide release.

Casting the voices of Freddie Prinze, Jr., Kelly Ripa, and my favorite Saturday morning cartoon pitch woman Jennifer Love Hewitt doesn’t come cheap. The film cost $40,000,000 to make. That’s U.S. budget deficit kind of stuff. The animated treasure holds the record for lowest opening weekend ever. What say you, Say?


Business models that easily adjust to meet increasing demand. As more products and services are performed by technology over the web, meeting new demand and releasing new products to the world marketplace has never been easier.


Why economics is relevant. Humans deal with finite resources. From attention span to oil, there’s only so much to go around. Hold up a second; let me finish updating my Facebook status here. Ok…economics helps answer how to use scarce resources in the best way.

Search Costs

I keep saying economics isn’t all money. The cost of buying a product is not only its dollar price, but the time and resources gone into finding the product. Our time may be the scarcest of resources we have to get philosophical on you. That means the opportunity cost of your time to shop around, price check, and travel to the marketplace are included. You were cutting coupons but you could have gone to your boyfriend’s softball game instead. Real cool. I know you think it’s boring but it means a lot to him! This is one more reason to shop on the internet which can help cut down on search costs. Keep in mind your purchase is likely inefficient unless you have perfect information about all facets of the sale, which may never happen. If you buy used iPods or cars off Craigslist rest assured you don’t have perfect information. The costs of the shoddy carburetor that breaks two weeks later are included, too.

Seasonally Adjusted

Ski resorts tend to struggle in the summer and Valentines Sweethearts have a short lived spike in demand. Many economic activities come and go throughout the year.

Secondary Market

eBay and Craigslist, from one garage to another. Stock exchanges are also considered secondary markets, the primary markets being the initial public offerings (IPO).


A paper asset backed by ownership stake. Stocks would be the most illuminating example.


Packaging existing assets like mortgages or credit cards and selling “shares” of the new, larger pool to investors. The assets used must be cash flow producers. Mortgage and credit card accounts produce cash flow in the form of payments made to the bank. Securitisation has become a trillion dollar industry and one reason the financial sector is the United States’ largest.

Securitisation has provided the U.S. a boost in GDP dating back to the 1970’s. This boost is valid but probably not indicative of long-term economic growth. Repackaging existing assets only gets an economy so far; particularly if those assets are debt instruments like mortgages, credit cards, and car loans that over-leveraged U.S. consumers can’t keep current.

Seller’s Market

Demand outstrips supply meaning a seller has lots of interested buyers. This gives a seller built-in advantages of negotiation power and peace of mind.


If you have more than one creditor on a loan, there is an order of repayment. A lot of people have two+ mortgage notes on their home from different creditors. One sits in second position, the other in first. The latter senior debt is much more likely to be paid back when the note holder stops making payments. That also means they are exposed to less risk and will likely have a lower interest rate return than that in second position and beyond.


Sound economic policies are hard to come by; according to sequencing order matters, too. State planners have the difficult task of exercising the right policies and sequencing them correctly while processing all economic information that constantly changes.


The reason cabbies should take a shower…they’re running a service business for God’s sake.

Shadow Price

“Who knows what evil lurks in the hearts of men? Heh-heh-heh-heh-heh-heh-heh! The Shadow knows …” He also knows the full opportunity cost of any economic activity. The shadow price is the opportunity cost.

Shareholder Value

What public companies are supposed to be maximizing.


A piece of ownership in a company, investors exchange money for the share in good faith the company will work to maximize its value.


Tectonic plates will shift my friend; any unexpected event impacting an economy.

Short Run

Economics time frame of less than one year.


Instant gratification; sacrificing long-term economic health for short-term gains. The disease may manifest itself into such forms as extremely creative accounting by private enterprise or government budget deficits.

It is said that some people disagree with government spending on a purely ideological basis. It is also said that some people agree with government spending on a purely ideological basis, such as support of liberal social programs to help the less fortunate.

Whether private firms manage a business simply to increase second-quarter stock price or governments nobly try to help the less fortunate, long-term health is often put at risk.


Feeling bearish about an asset. It’s a way to control an asset, such as stock, without actually owning it yet. An investor purchases a contract that gives them the right to sell the stock at the current price at some point down the line. The investor thinks that the stock will decrease in value by the time they own the stock. They’ve already secured a buyer for the stock at the higher price, allowing them to purchase the stock at the lower price and turn a profit.

If somebody “shorts the market” they’re buying a contract that’s betting an entire index like the S&P 500 will go down.


Trying to ease the problem of asymmetric information. Companies spend a lot of money on marketing and brand awareness to signal quality, visibility, and reliability to a consumer. Warranties do the same thing.

Students earn college degrees to signal to potential employers discipline, competency, and qualifications.

Simple Interest

Malnourished money only earning interest on the original lump sum. Compound interest is far better for the depositor as interest earned on the original funds also earn interest.

Social Capital

Studies show economies woven together with people who trust one another have higher productivity. If I can trust the other person to do what they say and the government not to shoot me, more transactions tend to get done. African countries run into a lot of problems with the latter.

Social Costs/Benefits

The well being of society as a whole. Private economic activities have costs, benefits, and externalities. Total social welfare is the sum of all three.


Government seizing the means of production in a society where private ownership does not exist; utopian sharing of all products and services in a fair and equal manner. Karl Marx predicted a “workers revolution” in a capitalist system and felt that socialism was inevitable. Marx also postulated that socialism was simply a rest stop on the way to Communism. Marx’s more poetic utopia, Communism, is a political philosophy of stateless, classless society without need for government.

Soft Loan

Awfully affordable loans with below-market interest rates.

Sovereign Risk

Forward to president@whitehouse.gov, unlisted email address of the Treasury Secretary, and unlisted email address of the Federal Reserve Chair: risk that government will be unable to perform on its debt or behind debt it promised to backstop.


Investors looking to realize a quick profit. Oil speculators buy oil contracts for oil they never intend on receiving. Real estate speculators buy real estate they never intend on keeping, often as an “owner occupant” to receive a lower interest rate. Speculators are often caught up in the euphoria of hot markets and spend little time on the asset’s underlying fundamentals. They count on a boost in short-term demand and inflation to make a quick buck.

Spot Price

Locking in a current price for something. Sometimes the contract is for immediate delivery while other times a current spot price can be locked in for a longer period of time. Airlines, for example, lock in spot prices for barrels of oil to help moderate and estimate future operating expenses.


Stagnant economic growth combined with rising prices. I’m pretty sure stagflation is engaged to the misery index.


Some deer-rich region.


All parties affected by an organization. This ranges from suppliers of a company to a nearby housing development breathing in corporate pollution. When companies work to maximize shareholder value, stakeholders do not always benefit.

Sticky Prices

Gumballs. Inflation hasn’t seemed to affect those; my quarter still buys a pretty big gumball. And it gets all sticky.

Stock Market

Exchanges where stock securities are traded by investors.

Stock market prices are considered discounted future cash flows of an underlying company. What this means is that a stock market price reflects all of the expected future cash flows, after expenses, that a company is thought to receive. The stock price takes these expected cash flows, discounts them back into what the money is worth in today’s terms, thus giving an investor the price they’d be willing to pay to own the stock. Investor’s required rates of return vary from person to person. As a company changes strategies or the marketplace changes on the company, the expected cash flow profits vary over time.


Government policy often causes a wave or two. Portfolio managers also use this technique to project how investments would perform during painful economic conditions.

Structural Unemployment

Joblessness caused by an employee’s skills and background not matching vacant jobs and employer needs. This is a deeper problem than the ups and downs of a business cycle.


A government gift to encourage increased demand for a product or service. A subsidy results in a lower price than the free market would normally generate. Subsidies are a form of government interference which affects how scarce resources would normally be distributed.

Substitute Goods

Interchangeable goods that usually come at each others expense. If a grocery store customer is buying Huggies they’re probably not buying Pampers.

Sunk Cost

If it’s a cost which has already been incurred, it’s sunk. When assessing future decisions in one’s personal life, personal finances, or business, these costs should be whisked away and not factored into the analysis. It’s all over; they can’t hurt you any longer. I suppose, if costs are grand enough, they can be both sunk and still able to inflict pain on you. Exhibit A: government spending and borrowing. Can I get myself a Sabbath year debt forgiveness, please?!


Some amount of a product or service available at a given price. A supplier makes a product or service available. OPEC represents two-thirds of the world’s oil supply. This supply is greatly a function of how much OPEC decides to drill out of the ground. They can manipulate prices on the supply end but without a strong oil demand, will not be able to keep prices as high as they’d like.

Alongside demand, supply is the most commonly used concept in economics. To bring a product or service to market a firm conducts market research to see if demand exists and undergoes production to bring to market. The Treasury Supplies dollars and McDonald’s supplies Happy Meals and the world goes round and round.

Systematic Risk

The risk that never goes away; like the Fed adjusting interest rates part-way through your investment horizon or a terrorist attack. This is the risk premium that lures investors to jump on board. A well-diversified portfolio can do away with unsystematic risk.

Systemic Risk

An economic cancer; the risk that one organization’s virus will multiply through the entire financial system or economy. For example, if one major bank becomes insolvent it is always feared that a bank run will incite. Such a run is where bank customers panic and withdraw their deposits out of every bank. Therefore, regulators are eager to backstop financial crises.

Systemic risk comes in many forms such as herd behavior by management of various firms. For example, much of the financial system hopped on the sub-prime bandwagon throughout the 2000’s. The upper management figured “hey, our competitors are making money, let’s grab a piece of the action.” Their eye was only on the short-term gains. It turns out underwriting risky loans to unworthy borrowers is an incoherent business model. Reselling pools of these loans to pass on the risk to another party didn’t ease the systemic cancer. Sub-prime management strategies fueled by greed and incompetence rocked the global financial system.

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