the concentration of economic decision-making centrally rather than diffusing such decision-making to many different decision-makers. In a country, this is achieved by the adoption of a CENTRALLY PLANNED ECONOMY where the state undertakes to own, control and direct resources into particular uses. In a firm, centralization involves top managers retaining authority to make all major decisions and issuing detailed instructions to particular divisions and departments. See U-FORM ORGANIZATION.
centrally planned economy or command economy or collectivism a method of organizing the economy to produce goods and services. Under this ECONOMIC SYSTEM, economic decision-making is centralized in the hands of the state with collective ownership of the means of production, (except labour). It is the state that decides what goods and services are to be produced in accordance with its centralized NATIONAL PLAN. Resources are allocated between producing units, and final outputs between customers by the use of physical quotas.
The main rationale underlying state ownership of industry is the view that the collective ownership of the means of production ‘by the people for the people’ is preferable to a situation in which the ownership of the means of production is in the hands of the ‘capitalist class’ who are able to exploit their élite position to the detriment of the populace at large. State control of industry enables the economy as a whole to be organized in accordance with some central plan, which by interlocking and synchronizing the input-output requirements of industry is able to secure an efficient allocation of productive resources. Critics of state-owned economic systems argue, however, that in practice they tend to be ‘captured and corrupted’ by powerful state officials, and that their top-heavy bureaucratic structures result in a highly inefficient organization of production and insensitivity to what customers actually want. See PRIVATE-ENTERPRISE ECONOMY, MIXED ECONOMY, NATIONALIZATION, COMMUNISM.
certificate a document signifying ownership of a FINANCIAL SECURITY (STOCK, SHARE, etc.). In the UK, such certificates are issued in the name of the person or company recorded in the company’s register of SHAREHOLDERS as the owner of these shares, new certificates being issued to buyers when shares are sold. In countries like the USA, where BEARER BONDS are used, stock certificates merely note the number of stocks or shares represented and do not include the name of the owners, the holder of the certificate being presumed to be the owner.
certificate of deposit a FINANCIAL SECURITY issued by BANKS, BUILDING SOCIETIES and other financial institutions as a means of borrowing money for periods ranging from one month to five years. Once issued, certificates of deposit may be bought and sold on the MONEY MARKET and are redeemable on their maturity for their face value plus accrued interest.
certificate of incorporation a certificate issued by the COMPANY REGISTRAR to a new JOINT-STOCK COMPANY whose MEMORANDUM OF ASSOCIATION and ARTICLES OF ASSOCIATION are acceptable to the Registrar. A company starts its legal existence from the date of its incorporation and thereafter is able to enter into contracts, etc., in its own name.
certificate of origin a document used to authenticate the country of origin of internationally traded goods. Most trading countries are prepared to accept certificates of origin issued by government departments of their trade partners or their appointees (CHAMBERS OF COMMERCE in the UK). However, complications as to their precise country of origin often arise in the case of goods that are assembled in one country using components that are in the main imported from others. See LOCAL CONTENT RULE, EXPORT.
ceteris paribus a Latin term meaning ‘other things being equal’ that is widely used in economic analysis as an expository technique. It allows us to isolate the relationship between two variables. For example, in demand analysis, the DEMAND CURVE shows the effect of a change in the price of a product on the quantity demanded on the assumption that all of the ‘other things’ (incomes, tastes, etc.) influencing the demand for that product remain unchanged.
chain store a multi-branch retail firm. All types of retailer, ranging from SPECIALIST SHOPS to DEPARTMENT STORES, can be organized to take advantage of the economics of HORIZONTAL INTEGRATION. Unlike single-shop concerns, chain stores are able to maximize their sales potential through geographical spread and maximize their competitive advantage by being able to secure BULK-BUYING price concessions from manufacturers and the supply of OWN LABEL BRANDS. See SUPERMARKET, DISCOUNT STORE, COOPERATIVE, DO-IT-YOURSELF STORE, RETAILER, DISTRIBUTION CHANNEL.
Chamberlin, Edward (1899–1967) an American economist who helped develop the theory of MONOPOLISTIC COMPETITION in his book The Theory of Monopolistic Competition. Prior to Chamberlin’s work, economists classified markets into two groups:
(a) perfect competition, where firm’s products are perfect substitutes;
(b) monopoly, where a firm’s product has no substitutes.
Chamberlin argued that in real markets goods are often partial substitutes for other goods, so that even in markets with many sellers the individual firm’s DEMAND CURVE might be downward sloping. He then proceeded to analyse the firm’s price and output decisions under such conditions and derive the implications for market supply and price. See also ROBINSON.
chamber of commerce an organization that operates primarily to serve the needs of the business community in an industrial city or area. Chambers of commerce provide a forum for local businessmen and traders to discuss matters of mutual interest and provide a range of services to their members, especially small businesses, including, for example, in the UK, information on business opportunities locally and nationally and, in conjunction with the DEPARTMENT OF TRADE AND INDUSTRY, export advisory services, export market intelligence, etc. See also BUSINESS LINK.
Chancellor of the Exchequer the UK government official heading the TREASURY whose main responsibility is the formulation and implementation of the government’s economic policy.
Chancellors of the Exchequer since 1970:
A. Barber 1970–74 (Conservative);
D. Healey 1974–79 (Labour);
G. Howe 1979–83 (Conservative);
N. Lawson 1983–89 (Conservative);
J. Major 1989–90 (Conservative);
N. Lamont 1990–93 (Conservative);
K. Clarke 1993–97 (Conservative) and
G. Brown 1997–to date (Labour).
change in demand see DEMAND CURVE (SHIFT IN).
change in supply see SUPPLY CURVE (SHIFT IN).
channel see DISTRIBUTION CHANNEL.
cheap money a government policy whereby the CENTRAL BANK is authorized to purchase government BONDS on the open market to facilitate an increase in the MONEY SUPPLY (see MONETARY POLICY).
The increase in money supply serves to reduce INTEREST RATES, which encourages INVESTMENT because previously unprofitable investments now become profitable as a result of the reduced cost of borrowing (see MARGINAL EFFICIENCY OF CAPITAL/INVESTMENT).
Cheap money policy, through MONEY SUPPLY/SPENDING LINKAGES, increases AGGREGATE DEMAND. Compare TIGHT MONEY. See LIQUIDITY TRAP.
cheque a means of transferring or withdrawing money from a BANK or BUILDING SOCIETY current account. In the former case, the drawer of a cheque creates a written instruction
