The Tax Research glossary seeks to explain the terms used on this blog that refer to more technical aspects of economics, accounting and tax. It recognises that understanding these terms is critical to understanding the economic issues that affect us all the time.
Like the rest of the Tax Research blog, this glossary is written by Richard Murphy unless there is a note to the contrary. It is normative approach and reflects post-Keynesian, heterodox economic opinion with a bias towards modern monetary theory. The fact that many items in that sentence are hyperlinked shows that they are explained in the glossary.
The copyright notices pertaining to the Tax Research blog apply to this glossary.
The glossary is designed to achieve three goals:
The glossary is not complete. It will grow over time. If you think there are entries that need adding please let me know by emailing glossary@taxresearch.org.uk. Please also feel free to suggest edits. The best way to do this is to copy an entry into Word and then send me a track-changed document indicating the changes that you suggest.
Because of the way in which it is coded this glossary automatically cross refers entries within itself and to the blog that it supports and within the glossary itself but if you think a link is missing please let me know.
Finally, if you like this glossary then you might like to buy me a coffee. It has required the support of a fair few to write it. You can do so here.
Glossary EntriesA | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z |
The economically active population of a place comprises "all persons of either sex above a specified age who furnish the supply of labour for the production of economic goods and services (employed and unemployed, including those seeking work for the first time) during a specified time reference period." (OECD).
The proportion of the population that is economically active can be a useful indicator of the health of an economy and its capacity for growth. The ratio can, however, change between jurisdictions because of differing social norms.
Effective interest rate Enterprise zone EquilibriumEconomic equilibrium is a state in which economic forces are balanced, and in the absence of external influences, the values of economic variables will not change.
In more specific terms:Market equilibrium occurs when the quantity of a good or service demanded by consumers equals the quantity supplied by producers at a certain price. At this point, there is no tendency for the price to change.
General equilibrium refers to a condition in which all markets in an economy are in simultaneous equilibrium, meaning supply equals demand across all markets.
No inherent pressure to change: When an economy is in equilibrium, there are no excess demands or surpluses pushing prices or quantities in one direction or another.
Hypothetical construct: Equilibrium is often a theoretical concept used to understand how economies might behave under certain conditions. Real-world economies are rarely in perfect equilibrium.
Dynamic vs. static: Some models focus on static equilibrium (a fixed point), while others study dynamic equilibrium, where variables may change over time but in a predictable or stable way.
In summary, economic equilibrium is where opposing economic forces are balanced, allowing markets or the overall economy to remain stable, at least temporarily.
The conditions for economic equilibrium depend on the type of equilibrium being discussed (market or general), but the general idea is that all agents' plans are mutually compatible, and there are no unexploited opportunities for gain. Here's a breakdown of the main conditions:
1. Market Equilibrium (for a single good)Occurs when:
Quantity demanded = Quantity supplied
At a given price, consumers want to buy exactly as much as producers want to sell.
No tendency for price to change
If demand exceeds supply, prices rise; if supply exceeds demand, prices fall. In equilibrium, neither force is present.
Rational behaviour by economic agents
Consumers maximise utility; producers maximise profit.
Requires:
Market-clearing prices in all markets
Every market reaches a price where demand equals supply.
All agents have perfect information
Everyone knows prices, technologies, preferences, and budget constraints.
No external shocks or interventions
No changes in technology, preferences, or external conditions that could shift supply or demand.
No frictions (idealised conditions)
Instantaneous price adjustments, no transaction costs, no market power (i.e., perfect competition).
Budget constraints are satisfied
Households do not spend more than their income or wealth allows.
Production plans match consumption plans
Firms produce exactly what households want to buy.
For economic equilibrium to occur:
Important caveat:Real-world economies rarely meet all these conditions. Equilibrium is a theoretical benchmark, not a guaranteed or necessarily desirable real-world outcome. Many economists now focus on disequilibrium, instability, and path dependency as more realistic descriptions of how economies work.
EquilibriumEquilibrium is the state to which classical, neoclassical and neoliberal economists all think that an economy should aspire.
Equilibrium exists at the point where supply and demand within an economy are matched and no participant in that economy has an incentive to change their position because to do so would leave them worse off, meaning that the optimal situation that equilibrium suggests exists will have been foregone.
Theories of equilibrium assume that all participants in an economy are:
The idea of equilibrium, with the stable state that it implies, is borrowed from physics, where it can be observed. In contrast, economic equilibrium has never been achieved because the conditions for it to do so are quite obviously absurd and contradict all known and observable human behaviour.
Because it is claimed that supply and demand are stable and have delivered both optimal prices and optimal levels of supply at the point at which economic equilibrium happens the theory of equilibrium is necessarily dependent upon and embraces theories of market supply and demand and of the profit maximising firm upon which the foundations of neoclassical economics (are built, as are those of neoliberal economics. These theories are built upon the idea that a firm can accurately predict the demand for its product at each price at which it might offer it for sale and also its own marginal (or total additional) cost of producing each item that it supplies at every possible level of production so that it can equate its supposed marginal cost for an item it makes available for sale with the additional or marginal extra revenue that it will generate from doing so. It is then argued that the firm in question will continue to supply that product until such time as the two are equal.
It is important to note that no firm in history has ever been in possession of this information.
It is also important to note that the only conditions in which they might have this information are those where:
The implication of these conditions is that only markets can deliver equilibrium outcomes within economies and what is assumed to be the distortionary activity of government is not required because the optimal position created by a market meeting these conditions cannot be bettered.
Although, as noted, it is impossible that the conditions that might deliver economic equilibrium might ever exist the achievement of this state remains the goal for almost all neoclassical economics and neoliberal economics. The argument that each presents that government interference prevents equilibrium is not based on an analysis of any achieved state of equilibrium but solely upon the assumption that government action will prevent this state being achieved when that is already inevitable because equilibrium will always, as a matter of fact, be impossible to deliver.
It is accepted that neoclassical and neoliberal economists can and do relax the assumptions pertaining to the achievement of equilibrium when undertaking their work, and this cannot be disputed. However, this relaxation is usually undertaken to determine the supposed cost of the sub-optimal outcome that they suggest arises within the economy as a consequence of that sub-optimal behaviour so that they might suggest the gain that might arise if only the perfect market to which they (alone) aspire was in operation. As such these relaxations are largely meaningless.
The concept of equilibrium lies at the very heart of neoclassical, neoliberal and positive economics and so at the very heart of much of the work of the economics profession whilst simultaneously explaining why most of the work of that discipline is as inevitably flawed and destined to fail as that of the alchemists always was. If you work on the basis of flawed assumptions you can never achieve a useful result.
EU Code of Conduct on Business TaxationThe EU Code of Conduct on Business Taxation promotes fair tax competition both within the EU and beyond.
The original Code of Conduct was agreed by EU finance ministers in 1997 as an intergovernmental, legally non-binding instrument. It has been primarily used to identify and assess preferential tax measures (i.e. measures that provide for a lower level of taxation than the level which is applicable in general) that are possibly harmful.
On 2022 the Ecofin Council approved a revised Code of Conduct, broadening the scope to include not just preferential tax measures but also 'tax features of general application', which create opportunities for double non-taxation or can lead to the double or multiple use of tax benefits.
Exchange traded fundsExchange traded funds (ETFs) are collective or pooled investment funds that are quoted on stock exchanges.
The funds usually have a very narrow focus. They do, for example, invest in government bonds, or a particular stock exchange or commodity index. They might also have a particular sector focus.
Exchange traded funds provide a compromise between collectivising risk and targetted investing.
The big concern with ETFs is with regard to their liquidity in the event of rapid changes in the perception of the value of either the fund or the underlying sector in which they invest.
Excise dutiesExcise duties are specific sales taxes usually added to the price of goods that are considered harmful or which create a specific economic externality.
Excise duties are commonly applied to tobacco, alcohol and carbon-based products but can be used for other purposes.
Excise duties are very effective revenue-raising taxes, partly because of the price inelasticity of demand for many of the products to which they are applied, e.g. cigarettes, which are consumed by those addicted to nicotine whatever the price charged.
The revenue raised is often dependent upon the ability of a jurisdiction to control smuggling and illicit products. Excise duties have a social as well as a revenue function (see entries on the reasons to tax).
Export Processing ZonesExport processing zones are artificial enclaves within states where the usual rules relating to taxation and regulation are suspended to create what are, in effect, tax havens within larger countries.
The rules that are relaxed may be for import and export taxes or corporation taxes or all three and may also extend to relaxing other regulations e.g. on health and safety or the environment. There may also be a relaxation of local taxes e.g. land taxes and social security charges.
See also freeports, of which these zones are a type.
As with all freeports, these zones are open to abuse, fraud and criminality, because of the relaxed regulation that tends to typify their operation. There is little evidence that they add economic value to the locations that host them.
ExternalityExternalities are the costs that a product gives rise to which are not usually reflected in its sale price because they are borne by society at large and not by the specific consumer of the item made available for sake e.g., the pollution from driving a car is an externality the cost of which the motorist does not directly bear.
Excise duties are often used to correct for the cost of externalities.
Tax externalities can arise from the impact one tax or the practice associated with one tax base can have on other taxes or tax bases, both within and between countries. These externalities are also known as tax spillovers.
Extreme centrism What is Extreme Centrism?Extreme centrism is not moderation. It is not the balanced, thoughtful negotiation between political extremes. Instead, it can be described as a radical form of political inaction, disguised as neutrality, which prioritises preserving the status quo above all else.
It is, at heart, deeply conservative, but unlike traditional conservatism, it avoids scrutiny by wearing the respectable mask of reasonableness. It positions itself in the “centre” of politics—claiming to rise above ideology—while in reality, it defends existing power structures, economic inequalities, and institutional failures by refusing to question or change them.
Key Features of Extreme CentrismStatus Quo Above All Else
Extreme centrists argue that their role is to keep things “stable” and “sensible.” But what they actually protect is the existing system—flawed and unjust as it may be. They claim to be pragmatic, yet they treat current arrangements as immutable, regardless of the harm they may cause.
Managerialism, Not Vision
These politicians frame their work as technocratic competence: balancing budgets, tweaking regulations, and fine-tuning systems. But this is not leadership—it's administration in the face of crisis. The world may be heading for the rocks, yet they believe their job is to “steady the ship,” rather than change its direction.
Resistance to Reform
Whether it's on inequality, climate action, or democratic accountability, extreme centrists resist the big ideas that social and ecological crises demand. To propose real alternatives is, in their view, irresponsible. But in clinging to “business as usual,” they deny the reality of the moment we are living through.
Moderate in Name Only
Their language is couched in the language of caution, restraint, and “balance.” But this is misleading. By actively blocking transformation, extreme centrists often become more dangerous than overt conservatives, because their apparent neutrality allows them to undermine progress with far less public scrutiny.
Extreme centrism is a political dead end. It pretends that we live in a world where only minor adjustments are needed—when in reality, we are living through polycrises: climate collapse, economic inequality, democratic decay. The centrists' refusal to acknowledge or respond to this with urgency is a threat in itself.
By claiming to offer safety, they dull public awareness of the real dangers ahead. By marginalising radical ideas as “unrealistic,” they block the emergence of alternatives. And by doing so, they leave the political space open to reactionaries and authoritarians who promise decisive action—however misguided or dangerous it may be.
In SummaryExtreme centrism is:
Conservatism in disguise, cloaked in the language of balance.
A refusal to act, masquerading as political responsibility.
A barrier to progress, posing as maturity and good governance.
A threat to democracy, because it suppresses the debate, vision, and ambition required to build a better future.
It is not the safe middle path—but a form of extremism in its own right.
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