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LEGAL CLAIMS: Ownership of the physical goods, services, and resources that make up the real side of the economy. Legal claims are a key feature of the paper, or financial side of the economy. Transferring legal claims is the primary method of diverting income from household saving to investment and government borrowing. Legal-claim buyers loan income and legal-claim sellers borrower income.
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ADVERSE SELECTION An inefficient, bad, or adverse outcome of a market exchange that results because buyers and/or sellers make decisions based on asymmetric information. This commonly results in a market that exchanges a lesser quality good, what is termed the market for lemons. Two related problems resulting from asymmetric information are moral hazard and the principal-agent problem. Two methods of lessoning the problem of adverse selection are signalling and screening.
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Francis Bacon (1561-1626), a champion of the scientific method, died when he caught a severe cold while attempting to preserve a chicken by filling it with snow.
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"The vacuum created by failure to communicate will quickly be filled with rumor, misrepresentations, drivel and poison. " -- C. Northcote Parkinson, historian
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WACM
Weak Axiom of Cost Minimization
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