Economics Dictionary of ArgumentsHome
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| Long and short run: In economics, the short run is a period where at least one input (like capital) is fixed, limiting flexibility. The long run is a period where all inputs can be varied, allowing full adjustment to market conditions. Firms can enter or exit the market in the long run, but not in the short run. See also Interest rates, Credit, Loans, Inflation, Monetary policy._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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Economic Theories on Long run/short run - Dictionary of Arguments
Henderson I 26 Long run/short run/stockmarket/economic theories/Henderson/Globerman: Critics have argued that rewarding managers with claims to partial ownership of the companies they manage, through stock options, creates incentives for managers to make decisions that increase the short-run profits of those companies at the expense oflong-run profits, since the latter might well be realized after current management is no longer employed. Short run: This argument assumes that stock markets overvalue short-run profits and undervalue long-run expected profits, a belief for which there is little justification. This view of the ineffciency of stock markets has led many politicians and would-be advocates of "improved" corporate governance to call for limiting or even eliminating the use of stock options as a means to compensate managers. DemsetzVs: (…) Demsetz(1) replied that owners have an incentive to make an effcient tradeoff between doing more active monitoring of managers hired to run the businesses they own and tying management compensation more closely to performance outcomes preferred by the shareholders. Regulation: Regulatory limits on stock options or other forms of managerial compensation tied to corporate profitability would require owners to do more indirect managing, which would limit the specialization of roles between owners and managers. The net outcome would likely be fewer effcient and profitable companies and greater diffculty in raising financial capital to fund start-ups and help small- and medium-sized companies grow. >Shareholders/Demsetz, >Stock market, >Interest rates. 1. Demsetz, Harold (1983). The Structure of Ownership and the Theory of the Firm. Journal of Law & Economics 26, 2: 375-390._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
Economic Theories Henderson I David R. Henderson Steven Globerman The Essential UCLA School of Economics Vancouver: Fraser Institute. 2019 |
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