Waste In Economics

Waste In Economics

Waste, in economics, the misuse of resources to produce goods or services that satisfy fewer or less intense wants than could have been satisfied by different use. Economic waste is thus concerned with maximizing the satisfaction of wants with the optimum use of resources: with demand, value, cost and price. It is fundamentally different from waste in the technical sense. For example, to dose down a branch railway line 'wastes' the equipment not yet worn out in the railway track, signalling equipment, trains, stations, etc. But in the economic sense it is wasteful to use additional human or material resources that can be used elsewhere to keep a branch line going if passengers prefer to travel by road or air, and show their preferences by refusing to pay prices sufficient to cover the cost of labour, materials and replacements necessary to maintain it. (This proposition would need to be amended if closing the branch line entailed 'social costs' or the loss of social benefits' that could not be expressed through the market mechanism of railway costs and fares. Economists differ on the extent to which social costs and benefits are covered in market pricing.)

Waste is therefore not to be judged by chemical, engineering, architectural or other physical criteria but by the economic criteria of value and cost and price.

Watering (Stock), the process by which the nominal capital of a company is issued without the payment of money equal to its value. The purpose is to create the impression that more capital has been put into the enterprise than has been the case. This impression may be desired because it may lead to a higher value being placed on the shares of the company, particularly for purposes of a take-over offer or for determining compensation payments. Watering may also be employed to make it appear that with existing revenue the rate of return on the capital invested is lower than it is, so that, for example, exploitation of monopoly power may be concealed behind an apparently low rate of return.

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Since then his writings have in turn been increasingly reinterpreted as a special case both by some followers and by some economists who had not wholly accepted his writings. The content of economics is in a state of change, and this consumeraffairs.org.uk site is therefore not a final statement of economic doctrine.

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