U’s

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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Uncertainty

Probably impossible to avoid, uncertainty causes economic inefficiency in a big way. Uncertainty breeds fear, followed by inaction and sometimes worse, shoddy action. Information has never been as widely and easily disseminated with the internet yet uncertainty is as relevant as ever. As individuals drown in information, the scarcest resource of all may just be one’s attention.


Underground Economy

Synonymous with the black economy. Insert drug smugglers, unlicensed plastic surgeons, and things politicians don’t report on their taxes here (okay, okay, include tax evasion by all).


Unemployment

Everyone of a working age who wants to work, is available to work, yet is still jobless. A working age is roughly considered around 15.


Unemployment Trap

If a person is paid not to work, they probably won’t work. Whether it’s the government, a parental unit, or a charity sending transfer payments to the jobless, the result is the same: a person unmotivated to work.


Unions

Loved and loathed these worker cartels fight for higher wages and improved benefits. From the International Union of Railways to the United Auto Workers, unions represent the noble pursuit to improve worker quality of life; though perhaps at the expense of long run economic prosperity.

With higher wages and benefits negotiated by collective bargaining, the supply of labor increases and the demand for labor decreases. In other words, more people want to work at the higher wage while companies are able to hire fewer workers. Unions actually cause a higher unemployment rate. In addition, a union worker’s product will cost incrementally more to produce making it more difficult to compete.

Some economists believe that unionizing the United States’ auto industry has led to its slow demise. Since its unionization in the 1930’s U.S. automakers have found it increasingly difficult to compete with foreign automakers and turn a profit. Japanese automaker Toyota has refused to deal with unions. Toyota now sells the most cars globally surpassing General Motors (GM) in 2008, a mark GM set for the previous 77 years.


Usury

Another term for predatory lending. In some countries usury laws aim to prevent loan sharks from preying on naive borrowers. Usury lending practice includes an upfront fee to access money as well as an interest rate charge. This lending practice is routine in contemporary economies. Real estate loans charge “points” to access money as well as an interest rate amortization schedule. A “point” is one percent of the amount being borrowed as an upfront fee. Three points is not an uncommon charge. An amortization schedule is the loan repayment schedule over the life of the loan; say a thirty-year real estate mortgage.

Predatory lenders are infamous in real estate investment circles giving loans at outrageous interest rates thinking the property owner will either give them an awesome return on their cash or default on the loan, allowing them to seize the property. If the property has oodles of equity, lenders hope (at least secretly), for the latter.


Utility

Everyone has the right to life, liberty, and the pursuit of utility. Being a utility maximizer is the key to life. Every person carries a different utility function, or web of preferences that make them happy. In this tangled web lie attention, security, music, charitable giving, a caramel macchiato, a vintage Scotty Cameron Newport 2 putter, and pretty colors; and everything else. Get out there and be a utility maximizer.

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